Verizon Sets Record by Selling $11 Billion in Bonds as Massive Vodafone Deal Nears

Jacob Harper |

Working on a tight schedule that has forced them to raise a substantial amount of cash by taking drastic measures, on Sept 11 telecom giant Verizon Communications Inc (VZ) issued out $11 billion in 10-year bonds that could end up netting investors a windfall totaling $49 billion.

The company is trying to close a deal with Vodafone plc (VOD) to buy out that company’s 45 percent stake in the highly profitable Verizon Wireless for $130 billion, a price tag far out of Verizon’s reach. Although the bond sale will leverage the already-indebted Verizon to a significant degree, Verizon Wireless should more than cover the expense: the division already generates $28.6 billion a year in free cash flow, and is expected to grow significantly in the coming years.

As details of the blockbuster deal – which reportedly also include Verizon giving Vodafone back their 23 percent  stake in Vodafone Italy– spread to other telecoms, Verizon’s rivals are reacting swiftly, and making major moves of their own. No more so than in Vodafone’s home continent, Europe.    

Following rumors of Vodafone’s consolidation in Italy, rival AT&T Inc. (T) is taking a long look at the beleaguered Telecom Italia SpA (TI) . AT&T has long been seeking to get into Europe, and with Verizon cleared out this would provide a perfect opportunity for AT&T to buy out Telecom Italia and establish a foothold in Europe. Mexico’s largest telecom, American Movil, is likewise looking to break into the disrupted European telecom industry, recently eyeing Dutch operator KPN for $9.5 billion.

At the same time, the EU is looking to overhaul the entire European industry, proposing the “most ambitious plan in 26 years” to reform the industry by unifying Europe’s communications market.  Regardless of regulatory shakeups in Europe, Verizon appears fully committed to the Vodafone deal, which would be the largest single deal in the history of capitalism. As an agreement between the two comes closer to becoming reality, in the next coming months investors can expect to see a lot of reactive movement from almost every major global telecom.

 

(image courtesy of Wikimedia Commons)

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Companies

Symbol Name Price Change % Volume
TI Telecom Italia S.P.A. New 8.15 -0.03 -0.37 394,805
VOD Vodafone Group Plc 25.20 0.17 0.68 5,329,470
VZ Verizon Communications Inc. 51.49 0.36 0.70 10,101,312
T AT&T Inc. 40.38 -0.03 -0.07 17,104,630
MRDH Meridian Holdings Inc 0.00 0.00 0.00 300

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