Report: Verizon, AT&T consider blockbuster $245B joint bid for Vodafone's assets

The Vodafone rumor mill keeps turning, with Verizon Communications (NYSE:VZ) and AT&T (NYSE:T) considering a joint bid for most of Vodafone's assets in a deal valued at $245 billion, according to a Financial Times report.

According to the report, which cited unnamed "usually reliable people," Verizon would buy Vodafone's 45 percent stake in Verizon Wireless while AT&T would take on Vodafone's non-U.S. assets. Such a deal would represent a 40 percent premium on Vodafone's share price, and would dwarf the next biggest takeover in history, AOL's $182 billion deal for Time Warner in 2000.

Verizon, AT&T and Vodafone declined to comment.

Such a deal would seemingly give all of the parties something they want: Verizon would get control of Verizon Wireless after years of angling; Vodafone would get a premium for its portfolio; and AT&T would get to expand in Europe. It should be noted that Vodafone CEO Vittorio Colao said in February that the company does not need to sell its stake in Verizon Wireless in order to invest more in Europe.

The rumors come weeks after Bloomberg reported that Verizon and Vodafone held talks that ranged from a merger of the two giant phone companies to Verizon merely buying Vodafone's 45 percent stake in the companies' Verizon Wireless joint venture. The report said Verizon wants to find a resolution to the two carriers' relationship this year.

While the size of a three-way deal involving AT&T, Vodafone and Verizon would be staggering, Medley Global Advisors analyst Jeffrey Silva said the transaction likely wouldn't present many competitive worries, since Verizon and AT&T would not be taking out a domestic competitor or expanding their domestic wireless footprints. "When you parse it out, at least in my initial review, on the U.S. front and on the U.K. front, I don't see where it raises any obvious antitrust problems," he told FierceWireless.

The bigger concerns, he said, are likely from a business and strategic perspective. He noted that AT&T does not have a huge presence in Europe and may want to use what he called the "inevitability" of Verizon getting full control of Verizon Wireless to expand across the Atlantic. "It would almost surprise me more if it doesn't happen at a certain point," he said.

Silva noted that, following AT&T's failed bid to acquire T-Mobile USA for $39 billion in 2011 and the re-election of President Obama, AT&T realizes that for the "next four years, they cannot do a deal of scale here."

"Becoming the world's largest wireless player would secure for AT&T purchasing power and competitive know-how that could be deployed domestically in its ongoing battle with the substantially larger Verizon Wireless (in post-pay)," Merrill Lynch analyst David Barden wrote in a research note last month,

In January the Wall Street Journal reported that AT&T was hunting for merger and acquisition opportunities in the European wireless market, betting it can roll out LTE technology there faster and make more money from new pricing schemes.

"As you consider what's happened in the last five years in the U.S. it's been impressive what transpired in the mobile Internet revolution and the U.S. has been outpacing the rest of the globe fairly considerably," AT&T CEO Randall Stephenson said on the company's fourth-quarter earnings conference call in January, according to a Seeking Alpha transcript. "And I think most people expect the rest of the world will catch-up and so the question you have to ask is are there opportunities for us to participate in that growth outside the U.S."

Stephenson, speaking in general terms, said that AT&T could create unique LTE roaming agreements or license applications in Europe. He emphasized that there are a lot of different options at AT&T's disposal.

For more:
- see this FT article (sub. req.)
- see this Bloomberg article
- see this NYT article

Related Articles:
Report: Verizon wants to resolve Vodafone relationship in 2013
Vodafone's Colao: We don't need to sell Verizon stake to bolster European markets
AT&T reportedly considering buying a European wireless carrier
Verizon Wireless to pay $8.5B dividend to parents Verizon, Vodafone
McAdam: Verizon Wireless won't pay annual dividend to Vodafone
Verizon Wireless to pay $10B dividend to Vodafone, Verizon Communications

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