What Is Important in the Financial World (4/25/2013)

Verizon Talks with Vodafone

Verizon Communications Inc. (NYSE: VZ) apparently wants to buy out the 45% of Verizon Wireless it does not own. The other portion is owned by Vodafone Group PLC (NASDAQ: VOD), which will be offered $100 billion. There have been rumors for years that a deal would be consummated. Verizon takes on a very large risk if it finally does make the purchase. The wireless service subscription business in the United State has become a zero-sum game, at least as far as absolute subscriber counts go. More than 300 million people have wireless service accounts, and that is at or above the level of the U.S. population. The big four wireless companies — AT&T Inc. (NYSE: T), Sprint Nextel Corp. (NYSE: S) and T-Mobile, which will soon merge with MetroPCS Communications Inc. (NYSE: PCS) — continue to try to take market share from one another. Sprint is likely to step up its pursuit of customers because of a new investment from likely owner Softbank. Each of these companies has increased its fees for data used by customers, but competition has put price pressure on these initiatives. Reuters said of Verizon’s bid for Vodafone’s stake:

The sources said Verizon was now ready to push aggressively for a deal. It hopes to start discussions with Vodafone soon for a friendly agreement but is prepared to take a bid public if the British company does not engage, one of the sources added.

“I don’t really see this as a surprise,” one of Vodafone’s 15 largest investors told Reuters, on condition of anonymity. “The talk about this deal has been quite intense recently. We knew that Verizon were definitely a keen buyer and that Vodafone were a keen seller.”

U.K. GDP Growth

The threat of a triple-dip recession in the United Kingdom has gone away, although gross domestic product (GDP) growth is so small that the discussion is a matter of semantics. The Office of National Statistics reported on preliminary U.K. GDP:

  • GDP increased by 0.3% in Q1 2013 compared with Q4 2012. GDP was 0.4% higher in Q1 2013 than in Q3 2011 and therefore has been broadly flat over the last 18 months.
  • By far the largest contribution to Q1 2013 GDP growth came from services; these industries increased by 0.6% contributing 0.47 percentage points (pp) to the 0.3% increase in GDP.
  • There was also a small upward contribution (0.03pp) from production; these industries rose by 0.2%, largely due to mining & quarrying, which increased by 3.2% following a weak Q4 2012 when extended maintenance in the North Sea reduced output.
  • These upward contributions were partially offset by construction; these industries fell by 2.5%, reducing GDP growth by 0.17pp.

The news will not stop the debate over whether the government’s ongoing push for austerity has ruined any chance for growth of GDP. As is true throughout the European Union, United States and Japan, the proponents of stimulus argue that without aide, none of these troubled economies will enter a phase of strong recovery.

Global Tablet Shipments

Apple Inc. (NASDAQ: AAPL) still holds the top spot among tablet makers. But Microsoft Corp. (NASDAQ: MSFT) has started to get a foothold in the business. The latest data on global tablet shipments:

According to the latest research from Strategy Analytics, global tablet shipments reached 40.6 million units in the first quarter of 2013. Android secured a robust 43 percent global share, while Apple iOS maintained its strong leadership at 48 percent. Windows secured a 7.5 percent global share.

Peter King, Director of Tablets at Strategy Analytics, said, “Global branded tablet shipments reached an all-time high of 40.6 million units in Q1 2013, surging 117 percent from 18.7 million in Q1 2012. Demand for tablets among consumer, business and education users remains strong. Apple produced a solid performance this quarter as the Mini had its first full term and shipped a robust 19.5 million mixed iPads worldwide maintaining market leadership with 48 percent share during the first quarter of 2013. Android captured a record 43 percent share of global branded tablet shipments in Q1 2013, rising from 34 percent a year earlier. Global Android tablet shipments increase 177 per cent annually to 17.6 million units.”