They’re at it again. The two partners in a little venture known as Verizon Wireless are revving up the rumor mill with new insights into a possible Verizon buy out of a portion of Vodafone’s stake in Verizon Wireless. The No. 2 wireless operator in the US has a 55% majority shareholder in Verizon Communications, and a 45% shareholder in Vodafone.
The sale of $10 billion of Vodafone’s Verizon Wireless stock to Verizon Communications was setup back in 2000, but inaction and the public’s short attention span has relegated the deal to back-burner news. But, Verizon’s filing with regulators on June 14 to raise up to $8 billion in debt for general corporate purposes has some analysts wondering what’s cookin’.
Edward Snyder, Charter Equity Research analyst, thinks that, “The highest probability is that (the debt filing) is tied to buying back the stake from Vodafone.” However, some analysts are arguing that the June 14 filing is nothing more than “routine fiscal housekeeping.” Kent Custer, A.G. Edwards analyst says that he doesn’t “draw a strong connection between (Verizon’s regulatory) filing and the chatter.” Gregory Miller, analyst at Deutsche Bank, believes the same. Miller says “It’s just a renewal of a prior shelf registration. People are reading too much into this.”
We’re sure Verizon would love to take full control of the wireless venture, but it’s just a matter of how much it’s worth. It’s something of a double-edged sword, this deal. With Verizon Wireless’s continuing push to increase it’s market share, Verizon Communications stands to gain a lot more with full control over Verizon Wireless – at the same time, Vodafone’s 45% stake is becoming increasingly more valuable. All the more reason for analysts to believe that Verizon is pushing to exercise the $10 billion Vodafone share buy-back option.