Verizon wanted the profits that Vodaphone got due to its 45 percent stake in Verizon Wireless. Plus it couldn't afford to wait too much longer. The sums involved in the deal are so huge that Verizon feared that fears of pressure on interest rates inspired by U.S. economic recovery could make a purchase more expensive.
Verizon has had a long-standing interest in buying out its partner, but the two companies hadn't agreed on a price until now. Analysts said Verizon wanted to pay around $100 billion for Vodafone's stake, while reports suggested that Vodafone was pressing for the $130 billion it is in line to get.
The largest deal on record is Vodafone's $172 billion acquisition of Mannesmann AG in 2000, according to research firm Dealogic.
The sale will also allow Verizon to expand abroad. Vodafone has previously had authority to nix expansion under the terms of joint wireless venture.
But Verizon faces risks in the purchase, as the U.S. wireless market is also facing growing competition in a saturated market. No. 4 T-Mobile US Inc., for instance, is making a resurgence.
The telecommunications landscape is changing. The wireless business has been lucrative for Verizon Communications as traditional landline services decline. But the company faces growing competition in a saturated market. No. 4 T-Mobile US Inc., for instance, is making a resurgence after shattering industry conventions, including two-year service contracts.
In the April-to-June quarter, Verizon Wireless added 941,000 devices to its contract-based plans, exceeding analyst estimates and continuing a strong run. It boosted service revenue by 8.3 percent from a year ago. Its closest rival, AT&T, is seeing revenue increases of around 4 percent.
But almost all of Verizon's gains on the wireless side resulted from customers upgrading to higher-priced plans or adding more devices to their existing plans, rather than an influx of new customers.
Meanwhile, No. 3 wireless company Sprint Corp. received a $21.6 billion investment from SoftBank Corp. in July, giving the Japanese investment firm a 78 percent stake. T-Mobile grew larger through a merger with smaller rival MetroPCS on April 30.
Separately, Verizon raised its quarterly dividend by a penny and a half to 53 cents. That makes its annual dividend $2.12 from $2.06.
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