Why Would Vodafone Sell Verizon Wireless?
Posted by: Olga Kharif on March 14, 2006
Lately, there have been lots of media reports claiming that Verizon has approached joint venture partner Vodafone about buying out Vodafone’s stake in Verizon Wireless. What I’d like to know is, Why in the world would Vodafone want to sell the stake?
Selling that stake makes about as much sense for Vodafone as for Deutsche Telekom to sell its stake in T-Mobile USA: none at all. Unless Verizon is willing to pay a fat, very fat premium, that is.
Consider: In the fourth quarter of 2005, Verizon Wireless's revenues were up 18.3% year over year. Vodafone's total sales, meanwhile, only grew by 7%. And Vodafone expects potentially less growth this year due to increased competition in Europe.
But the U.S. market, meanwhile, is becoming less competitive. Massive consolidations (AT&T-BellSouth, Cingular-AT&T Wireless) are making this one of the best developed markets to be in. So why in the world would Vodafone want to sell out? Why would it want to exit one of its fastest-growing businesses?
This makes about as much sense as for Deutsche Telekom to sell its T-Mobile USA division, one of its fastest-growing businesses.
Unless carriers like Verizon are willing to cough up a substantial premium, Deutsche Telekom and Vodafone won't be interested in exiting the U.S. market.
Sure, shareholders say Vodafone needs to focus more on its European operations. But as Vodafone faces growth pains, it will want to expand the number of fast-growing businesses it's in instead of reducing them.