Verizon Communications has reached an agreement to buy Vodafone Group's 45 percent stake in its Verizon Wireless subsidiary for $130 billion.
Under the deal, Verizon will take 100 percent ownership of the wireless unit, the largest mobile operator in the U.S. This will enhance its ability to offer customers "seamless and integrated services," the carrier said in a press release.
The transaction has been unanimously approved by the boards of both companies and is expected to close in the first quarter of 2014, subject to customary regulatory approvals. Verizon will pay a combination of cash and stock for Vodafone's stake.
"As a wholly owned entity, Verizon Wireless will be better equipped to take advantage of the changing competitive dynamics in the market and capitalize on the continuing evolution of consumer demand for wireless, video and broadband services," Verizon Chairman and CEO Lowell McAdam said in the press release.
"This transaction allows both Vodafone and Verizon to execute on their long-term strategic objectives," Vodafone Group CEO Vittorio Colao said in the release. "Our two companies have had a long and successful partnership and have grown Verizon Wireless into a market leader with great momentum. We wish Lowell and the Verizon team continuing success over the years ahead."
Minimal effect in U.S., analysts say
Verizon has sought to buy out its wireless business, originally formed as a joint venture with Vodafone, for several years. The transaction is unlikely to have a significant impact on U.S. mobile consumers, industry analysts said last week. Vodafone may use the huge windfall to buy smaller carriers and further its pursuit of wireline operations, analysts said.
Verizon was willing to pay a sky-high price for Vodafone's stake because of the strategic importance of the deal, said Chetan Sharma, founder and president of Chetan Sharma Consulting.
"They will be in control of their own destiny and they clearly believe in their future and that the stake will be worth a lot more in a few years," Sharma said in an email interview.
Because Verizon stock will make up part of the deal, it's a good one for Vodafone, said analyst Roger Entner of Recon Analytics.
"This transaction shows continued faith about the outperformance of of VZW and the U.S. wireless market in general," Entner said via email. "It also allows Vodafone to continue to participate in the upside in the U.S."
Vodafone is expected to use proceeds of the buyout to shore up its European business.
"What is finally motivating Vodafone is the implementation of their European integrated carrier strategy," Chetan Sharma, founder and president of Chetan Sharma Consulting, told IDG News last week.