Vodafone signs Verizon Wireless deal for $130 billion

Vodafone on Monday said it will exit from Verizon Wireless for $130 billion by selling its 45 percent stake. Vodafone did not hint at any acquisitions for utilizing the huge $60 billion cash. Rather it will enhance telecom Capex to boost 4G and enterprise offerings.

Verizon Communications will buy the stake for cash and stock.

The transaction is expected to close in the first quarter of 2014.

Vittorio Colao and Lowell McAdam

The VZW Transaction represents a valuation of 9.4x EV / LTM EBITDA and 13.2x EV / LTM OpFCF, Vodafone said.

The consideration comprises: $58.9 billion in cash; 60.2 billion in Verizon shares2 $5 billion in the form of Verizon loan notes; $3.5 billion in the form of Verizon’s 23 percent stake in Vodafone Italy; and $2.5 billion through the assumption by Verizon of Vodafone net liabilities relating to the US Group.

Vodafone will implement a new organic investment program – Project Spring – to establish further network and service leadership through additional investments of £6 billion over the next three financial years.

Vittorio Colao, Vodafone Group CEO, said: “The Project Sprint will boost Vodafone’s 4G and enterprise offerings.”

Vodafone did not hint at any acquisition of telecom assets in overseas markets such as Latin America, India, Africa, etc. (Should Vodafone target Airtel for M&A?)

At completion, Vodafone shareholders are expected to receive all the Verizon shares and $23.9 billion of cash totaling $84 billion.

Verizon will pay Vodafone $58.9 billion in cash.

Lowell McAdam, Verizon chairman and CEO, said: “The capabilities to wirelessly stream video and broadband in 4G LTE complement our other assets in fiber, global IP and cloud. These assets position us for the rapidly increasing customer demand for video, machine to machine and big data.”

Verizon on Monday said it will benefit from the transaction. (Vodafone-Verizon deal: Is U.S. a wrong telecom market to bet?)

Verizon Wireless posted $75.9 billion in operating revenues in 2012 and $39.5 billion in the first half of 2013. Operating income margin was 28.7 percent in 2012 and 32.6 percent in the first half of 2013. EBITDA service margin (non-GAAP) was 46.6 percent in 2012 and 50.1 percent in the first half of 2013.

Since 2000, Verizon Wireless has invested more than $80 billion in its network. It has 100.1 million retail connections.

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