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Vodafone and Verizon bosses agreed $130bn deal watching ice hockey match Vodafone and Verizon bosses agreed $130bn deal watching ice hockey match
(35 minutes later)
Vodafone's sale of its stake in Verizon, the largest corporate transaction for a decade, was agreed on the benches of New York's Madison Square Garden, in front of thousands of spectators watching an ice hockey match.Vodafone's sale of its stake in Verizon, the largest corporate transaction for a decade, was agreed on the benches of New York's Madison Square Garden, in front of thousands of spectators watching an ice hockey match.
This summer, with rumours swirling that a deal was coming, Vodafone's chief executive, Vittorio Colao, and Verizon Communications' boss, Lowell McAdam, held crucial talks at a New York Rangers game instead of meeting behind the closed doors of an investment bank.This summer, with rumours swirling that a deal was coming, Vodafone's chief executive, Vittorio Colao, and Verizon Communications' boss, Lowell McAdam, held crucial talks at a New York Rangers game instead of meeting behind the closed doors of an investment bank.
"To close the transaction," Colao said in an interview published on Friday, "me and Lowell McAdam met at Madison Square Garden during the New York Rangers ice hockey game, in front of tens of thousands of fans, to talk business. The rumour had already come out, so we said let's go in the most visible place in the world so nobody suspects anything.""To close the transaction," Colao said in an interview published on Friday, "me and Lowell McAdam met at Madison Square Garden during the New York Rangers ice hockey game, in front of tens of thousands of fans, to talk business. The rumour had already come out, so we said let's go in the most visible place in the world so nobody suspects anything."
Colao said the value of the Verizon Wireless network had increased by five times since it was created as a joint venture 13 years ago. The deal will see Vodafone share £54bn with shareholders, and set aside £6bn for upgrading and expanding its networks and services.Colao said the value of the Verizon Wireless network had increased by five times since it was created as a joint venture 13 years ago. The deal will see Vodafone share £54bn with shareholders, and set aside £6bn for upgrading and expanding its networks and services.
"The investment in Verizon quintupled in value since we made it," he told Italy's Il Corriere Della Sera. "Verizon is also improving its cash flow and earnings profile thanks to a transaction that increases their concentration on America and ours on Europe and emerging markets.""The investment in Verizon quintupled in value since we made it," he told Italy's Il Corriere Della Sera. "Verizon is also improving its cash flow and earnings profile thanks to a transaction that increases their concentration on America and ours on Europe and emerging markets."
Colao said further consolidation was "inevitable". As European mobile networks see their profits squeezed by a combination of recession and a movement of value towards American companies like Google and Apple, a number have been merging local operations. Colao said further consolidation was inevitable. As European mobile networks see their profits squeezed by a combination of recession and a movement of value towards American companies such as Google and Apple, a number have been merging local operations.
In Germany, the number of networks is likely to fall from four to three as Dutch operator KPN negotiates the sale of its challenger brand E-Plus to Telefónica. The deal would allow the Spanish group to share the German market with just two other network owners, Vodafone and Deutsche Telekom. In Germany, the number of networks is likely to fall from four to three as the Dutch operator KPN negotiates the sale of its challenger brand E-Plus to Telefónica. The deal would allow the Spanish group to share the German market with just two other network owners, Vodafone and Deutsche Telekom.
"Digital technology, by its nature, leads to consolidation because it requires a big initial investment because securing a return takes longer," Colao said. "Consolidation is inevitable. In the digital world, to be able to support this stage without big shoulders is impossible.""Digital technology, by its nature, leads to consolidation because it requires a big initial investment because securing a return takes longer," Colao said. "Consolidation is inevitable. In the digital world, to be able to support this stage without big shoulders is impossible."
Colao added that he had congratulated Microsoft boss Steve Ballmer on his deal to buy Nokia's smartphone business on Tuesday, saying it would be good for Europe and its telecoms businesses. Colao added that he had congratulated the Microsoft boss Steve Ballmer on his deal to buy Nokia's smartphone business on Tuesday, saying it would be good for Europe and its telecoms businesses.
"I paid my respects to Elop and Steve Ballmer for their deal, because it is a strategic decision which makes sense for everyone. Frankly, if Nokia-Siemens, a European technology manufacturer, is strengthened it is better for us. If Microsoft creates a third ecosystem to those of Apple and Google, it is better for us.""I paid my respects to Elop and Steve Ballmer for their deal, because it is a strategic decision which makes sense for everyone. Frankly, if Nokia-Siemens, a European technology manufacturer, is strengthened it is better for us. If Microsoft creates a third ecosystem to those of Apple and Google, it is better for us."
Vodafone's agreement with Verizon involved a return of the American company's 23% stake in Vodafone Italia. Highlighting the decline in value in Europe compared to America, Colao pointed out that when Verizon Wireless was created, Vodafone's 45% share in the US network was worth three times the 23% stake in Vodafone Italia. On Monday, Vodafone agreed to buy the Italian stake back for $3.5bn, 37 times less than the $130bn paid for the Verizon holding.Vodafone's agreement with Verizon involved a return of the American company's 23% stake in Vodafone Italia. Highlighting the decline in value in Europe compared to America, Colao pointed out that when Verizon Wireless was created, Vodafone's 45% share in the US network was worth three times the 23% stake in Vodafone Italia. On Monday, Vodafone agreed to buy the Italian stake back for $3.5bn, 37 times less than the $130bn paid for the Verizon holding.
He said US networks had grown in value because two companies, AT&T and Verizon Wireless, now dominate a market with 300 million customers. "In the United states, there is no concern about the size of the player." He said US networks had grown in value because two companies, AT&T and Verizon Wireless, now dominated a market with 300 million customers. "In the United states, there is no concern about the size of the player."
The key to success for Vodafone will be to invest in creating better services than its rivals, said Colao. "There is a risk that the difference between one operator and another is reduced to zero and with investment I can create more competitive services: customers want to use their iPad to watch the match. I myself watch the BBC in a taxi."The key to success for Vodafone will be to invest in creating better services than its rivals, said Colao. "There is a risk that the difference between one operator and another is reduced to zero and with investment I can create more competitive services: customers want to use their iPad to watch the match. I myself watch the BBC in a taxi."