Vodafone has agreed to allow Verizon to buy out its 45 percent stake in their joint venture Verizon Wireless, for USD 130 billion. As part of the deal, Vodafone will also gain 100 percent control of Vodafone Italia. Over 70 percent of the proceeds from the sale, including cash and shares in Verizon, will be handed to Vodafone's shareholders, and Vodafone will also increase its dividend for the current fiscal year. In addition, Vodafone announced plans to invest GBP 6 billion of the proceeds in strengthening its remaining activities.
The mega-deal has prompted a great deal speculation about what Vodafone will do with the money. The answer is: not very much. It's clear that remunerating shareholders has a higher priority than takeovers or a radical change in its investment strategy.
It's not that there are no acquisitions possible - on the contrary, there are opportunities. The previously 'mobile-only' operator has for some years now been pursuing a 'total communications' strategy, the basis of which is an asset-light approach of reselling fixed services rather than buying or building its own networks. For example, Vodafone has just launched FTTH services in Spain in a partnership with Orange. Italy has for some time been a candidate for expansion, but Swisscom appears reluctant to sell the prime takeover target, its subsidiary Fastweb. Deutsche Telekom is also struggling with the question of mobile-only or integrated offerings in a number of countries, which should generate further speculation of possible disposals.
However, a company does not do acquisitions just because it's had a load of cash come in. Acquisitions, especially when big companies are involved, are a long process. Especially for Vodafone - for example, in the Netherlands. It's a mystery to us how it could have happened, but Vodafone was not able to acquire the Reggefiber and Reggeborgh activities bought by KPN last year. Instead it ended up buying the tiny player Wiericke. Speculation that Vodafone could buy Liberty Global or itself be a takeover target for AT&T may look good on paper, but these are not realistic scenarios. Vodafone's decision to sell to Verizon (giving up a good part of its growth) is also a big deal, but much less complex.
Vodafone will expand in fixed services, that's for certain, but will do so in its own time, on a case-by-case and country-by-country basis. It could of course be busy preparing a major takeover, but in the mean time it's focus will be on keeping shareholders happy and reducing its debt.
