Verizon Wireless and Vodafone Group Deal: What Went Right, What Went Wrong

The 13 year soap opera relationship between Verizon Wireless and Vodafone Group has finally come to an end as Verizon announced in September that it had agreed to buy out Vodafone’s 45% stake in Verizon Wireless for $130 billion.


26 December 2013

Big-MA-Deals

The 13 year soap opera relationship between Verizon Wireless and Vodafone Group has finally come to an end as Verizon announced in September that it had agreed to buy out Vodafone’s 45% stake in Verizon Wireless for $130 billion.

I’ve read that Verizon was interested in taking complete control of their company for years, but the two entities could never quite meet on price.  The news itself won’t have any major impact for mobile subscribers, but it does serve as an interesting case study on the benefits and drawbacks of joint ventures as a transaction type.  The partnership was launched in 2000, and 13 years later both companies wanted out.

So what went right and what went wrong?

With the joint venture intact, it was difficult for Verizon Wireless to integrate their offerings.  For Vodafone, the partnership was never an ideal fit given their minority stake and the fact that they had limited input into strategic decisions.  That said - it mostly worked.  Both companies reaped financial benefits while they were aligned.

So, is this separation a win-win for telecom's odd couple?  After payouts to shareholders, Vodafone will add $30bn to their balance sheet which will help pay down debt, and also help fund global network improvements over the next two years through the company’s Project Spring campaign.  Not to mention, they will return $84 billion to shareholders in the form of cash and Verizon’s stock.  As for Verizon, consolidating the business should provide operational efficiencies and tighter product integration – bolstering their presence in the hyper-competitive wireless industry.

Only time will tell who will benefit the most from the split. Despite some bumps along the 13 year journey, in my opinion, it appears that both parties ultimately benefitted from the joint venture.

 

 



Ben Collins

Ben Collins

As Director of Strategy and Product Marketing, Mr. Collins is responsible for driving the growth of Intralinks’ Corporate Development platform, including the company’s offerings for facilitating both buyside and sellside transactions.