Verizon Communications agreed on Monday to pay $130 billion for the 45 per cent stake in Verizon Wireless owned by British cellphone carrier Vodafone.
Reuters reports: The deal in cash and stock will give Verizon full access to the profits from the United States' largest mobile operator, handing it fresh firepower to invest in its mobile network and fend off challengers in a tough market that is fast becoming even more competitive.
For the British group, the accord will allow it to return 71 per cent of the net proceeds - or $84 billion including all of the stock - to shareholders while also ramping up investment in its networks to set itself apart from rivals.
Under the terms, Vodafone will get $58.9 billion in cash, $60.2 billion in Verizon stock, and an additional $11 billion from smaller transactions in a deal that is due to close in the first quarter of next year.
The deal will become the third largest announced deal in the world after Vodafone's $203 billion takeover of Germany's Mannesmann in 1999 and AOL's $181 billion acquisition of Time Warner the following year. Verizon has also managed to raise one of the largest ever financing packages at $60 billion.
The deal, in which Verizon will buy Vodafone's 45 per cent stake in Verizon Wireless, is the defining event in the careers of Vittorio Colao and Lowell McAdam, the chief executives of Vodafone and Verizon, respectively. They had succeeded in rebuilding relations between the two sides, long strained by clashes about the Wireless dividend and who would eventually seize full ownership.
McAdam told Reuters in an interview that the two men had initially discussed the possibility of combining Verizon and Vodafone before deciding that the stake sale made more sense for both companies.
He said the companies realised they were close to a deal after they spent the morning together in a hotel in San Francisco, chatting while on the exercise bike in the gym and later over breakfast.
The code name assigned to the deal was Project River. "We were Hudson and they were the Thames," he said, referring to rivers in New York and London.
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