Verizon’s Offer to Vodafone Will Likely Fall Short

Telecom News Editorials Reports Glossary

6:15 am on March 14, 2006 | Category: Business, Mobile Devices

Analysts at Deutsche Bank Securities predict that global wireless giant, Vodafone Group, will likely consider Verizon’s buyout offer for its own wireless division inadequate.

Verizon Communications has reportedly made an informal offer of $40 billion for Vodafone’s 45% stake in Verizon Wireless. But Deutsche Bank analyst, Victor Shvets claims that, large as it may seem, this offer won’t be enough to secure a deal.

“Based on implied transaction multiples for Cingular, valuation for Vodaphone’s stake could easily inflate towards $45 billion or as high as $48 billion to $50 billion,” Shvets wrote in a report yesterday.

The analyst said that Verizon’s eagerness to purchase Vodafone’s share is “strategically rational,” but also noted that making an offer of more than $40 billion could damage the US telecom company’s stock price.

With market leader, Cingular soon to be united under a single owner, Verizon is being left in a difficult position. Most analysts seem to believe that getting full control of Verizon Wireless is more logical than taking over a competitor like Qwest or Alltel, but investors are likely to question a high-priced deal with Vodafone.