Vodafone Rejects $38 Billion Offer for Verizon Wireless Stake

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Vodafone Rejects $38 Billion Offer for Verizon Wireless Stake

6:30 am on May 10, 2006 | Category: Business, Wireless, Corporate

The deadlock in negotiations continues, with Verizon Communications again having its offer rejected for Vodafone Group’s 45% stake in the American company’s cell phone division.

After stating its desire to buy the rest of Verizon Wireless, the U.S. telecom giant made an offer of $38 billion in hopes of a quick deal. Vodafone, however, which has stated it is in no hurry to sell, has valued the asset at $50 billion, and refused the initial offer as too low.

Many shareholders have called on Vodafone to gracefully part with its 45% stake, but doing so would force the company to abandon its global ambitions to focus only on Europe and a few developing markets. Selling the stake could also result in a huge tax liability for the mobile giant.

Most analysts, however, believe that Vodafone has little long term potential in the American market, due to its lack of brand presence, as well as the face that it focuses on a different wireless technology standard than Verizon Wireless.

Verizon’s motivations for wanting to buy the stake are clear, especially with the pending AT&T/BellSouth merger set to unite its leading wireless rival, Cingular, under a single owner.

Neither Verizon nor Vodafone has commented on this latest bargaining gridlock, but it will be very difficult for the two companies to reach a mutually acceptable deal so long as the $12 billion valuation gap remains in place.