Verizon To Pay $130 Billion For Stake In Vodafone
ROBERT SIEGEL, HOST:
One of the biggest deals in the history of the telecommunications business was announced this morning. Verizon Communications is buying the part of Verizon Wireless that it does not already own. It will pay $130 billion to the British company Vodaphone. The deal has been approved by the boards of the two companies. NPR's Jim Zarroli joins me now. And, Jim, explain what the two companies have agreed to.
JIM ZARROLI, BYLINE: Well, despite the name Verizon, until now didn't own all of Verizon Wireless. About 45 percent of it was owned by Vodaphone. Verizon has wanted to own Verizon Wireless outright, but the two companies could never agree on a price until now. I mean, they've been in and out of talks for a decade. Now, interest rates are going up so that means borrowing costs are going up, so that puts pressure on the companies to do the deal now so they have.
And as a result, Verizon Wireless will be totally owned by Verizon.
SIEGEL: And what's behind Verizon's reasoning here. I mean, why are they spending $130 billion to buy out Vodaphone?
ZARROLI: Well, wireless is growing really fast. People are giving up their landlines and using their wireless devices exclusively. Wireless is the most profitable part of the telecom business and Verizon Wireless is the most profitable wireless company. It has 100 million customers. It just provided this steady stream of cash and so by doing this deal, Verizon is going to be getting all of that cash. No longer will part of it be flowing across the ocean to Vodaphone.
SIEGEL: And for those 100 million customers of Verizon Wireless, will this deal make any difference?
ZARROLI: You know, I don't think they're going to notice it necessarily, at least not in the short term. Verizon already owned most of the wireless unit. It already controlled it, so this doesn't really change the competitive landscape, which is why antitrust regulators aren't likely to have any problems with it. I think the deal is interesting because of what it says about the growing power of wireless.
I mean, we've seen several big deals in the industry this year. Sprint was acquired, T-Mobile was in a merger. You're seeing this recognition that wireless is where the money is in telecom. And these companies are trying to get bigger and stronger so they can compete. And that's true all over the world. One of the reasons why Vodaphone did this deal was because it's getting a lot of money and it can use the money to expand into the European telecom market.
SIEGEL: Okay. Thank you, Jim.
ZARROLI: You're welcome.
SIEGEL: That's NPR's Jim Zarroli on today's deal over Verizon Wireless.
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