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Verizon, Vodafone stake out in the US

Stumbling block removed

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A potential stumbling block to Vodafone launching a bid for AT&T Wireless was removed last week, after Verizon Communications, the majority shareholder of Verizon Wireless, said it would not oppose a decision by Vodafone to sell its 45% Verizon Wireless stake. Verizon Wireless is a successful business, but Vodafone prefers to have a controlling stake in its ventures.

"We feel very good that our relationship with Vodafone is working very well," said Ivan Seidenberg, Verizon Communications' chief executive, but "we certainly would not shy away from wanting to own 100% of Verizon Wireless," he said. "The real choice on this is Vodafone's. It's their call to make the step."

It is no wonder that Verizon Communications seems keen to gain full control of its wireless operation. It has seen its traditional fixed-line revenues come under pressure from a user move to mobile phones and email. In the last quarter alone, Verizon lost 4.2% of its local telephone access lines.

To offset declining fixed-line sales, the operator has been pushing into new markets such as wireless, long-distance telephony and high-speed wired and wireless Internet access. The company has also unveiled a plan to rollout consumer and corporate VoIP (voice over Internet protocol) services.

Vodafone's 45% stake in Verizon Wireless would almost certainly be sacrificed to help it raise the necessary capital to acquire full control of AT&T Wireless. But launching a bid carries risks for Vodafone, with many analysts and financial institutions not convinced it would be a wise move to exit its successful minority Verizon stake, especially considering the $30 billion plus price tag AT&T Wireless carries.

Vodafone is keen to resolve its troublesome set-up in the US. In the past it has been frustrated by Verizon's refusal to sell its majority stake, as Vodafone's typical overseas expansion policy has been to increase its shareholding in its foreign operators, obtain a controlling stake, and then fully buy it out.

Vodafone management is therefore currently faced with some important decisions: it must decide whether to launch an aggressive bid for the number three US mobile operator, or instead go after control of French mobile operator SFR, which is currently controlled by troubled media giant Vivendi.

Source: ComputerWire/Datamonitor

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