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Corporate Finance: Verizon Vodafone case study - Essay Example

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Corporate Finance: Verizon Vodafone case study

The Verizon Communication plans to finance this business deal with the help of bonds and debt financing. The bankers of Verizon Communications have already agreed the company to provide $60 billion in debt financing to complete this plan successfully. This paper will analyse different aspects of the Verizon’s plan to buy out Vodafone’s 45% stakes (in the Verizon Wireless) for a sum of $130 billion. History of the joint venture The merger between Bell Atlantic Mobile and GTE Wireless on 3rd April 2000 resulted in the formation of Verizon Communications. One year earlier, UK based Vodafone AirTouch Plc had declared a joint strategic alliance with Bell Atlantic with intent to form a wireless service provider. This strategic business proposal received approval from governmental authorities within six months and commenced operations as Verizon Wireless on 4th April 2000. Verizon Communications owns 55% shares through its subsidiaries (Bell Atlantic Mobile 24.2% and GTE Wireless 30.8%) whereas the Vodafone Group holds 45% shares through its subsidiaries (PCS Nucleus, L.P 6.2% and JV PartnerCo, LLC 38.8%) (p.603) (DePamphilis, 2008). The addition of GTE Wireless’ assets resulted from the establishment of Verizon Communications assisted the Verizon Wireless to become the United States’ largest mobile network provider. Although Verizon Wireless lost that position with the Cingular’s takeover of AT&T Wireless in 2004, the organization regained the status following the acquisition of Alltel in 2009 (Rubner, 2004). In 2006, the organisation acquired West Virginia Wireless, a locally operating cell phone company. Over the next two years, Verizon Wireless announced a deal to acquire Rural Cellular Corporation (Unicel) for nearly $2.67 billion, and gained approval from FCC and the Department of Justice. The Department of Justice required Verizon to divest its certain properties in New York, Vermont, and Washington for the completion of the acquisition. In mid-2007, the Verizon Wireless made a deal to buy the assets of Ramcell of Oregon hoping that this business deal would assist the company to increase its coverage in Southern Oregon. In 2008, SureWest Communications announced a business proposal to sell its operating assets to Verizon Wireless and several months later Verizon announced that it had agreed to buy Alltel for $5.9 billion along with assumption debt. In the same year, the company purchased two markets in Kentucky, and this deal helped the company add 40,000 new customers to its wireless network. In 2009, AT&T agreed to sell five Centennial Wireless service areas in the United States to Verizon (att.com 2009, News release). On the same date, AT&T announced that it had planned to buy assets from Verizon Wireless for a sum of $5.35 billion in cash. As per the terms of this agreement, AT&T will acquire wireless assets such as licenses, network properties, and 1.5 million current subscribers spread across 18 states. Recently in 2012, Verizon Wireless announced its takeover of South-eastern New Mexico Wireless markets owned by Plateau Wireless (verizonwireless.com, 2012). This purchase benefited the company to spread its native network to the counties of Eddy, Lea, Chaves, and Lincoln (ibid). On 2nd September 2013, Verizon Communications revealed that it had agreed to purchase Vodafone’s 45% share in Verizon Wireless ...Show more

Summary

Corporate Finance: Verizon Vodafone case study Introduction Verizon Wireless is the joint venture between Verizon Communications and Vodafone. Verizon Communications holds 55% shares in the venture. Although both Vodafone and Verizon had been trying to increase their shareholding in the Verizon Wireless, either of them was not willing to surrender their shares…
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Corporate Finance: Verizon Vodafone case study essay example
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