Vodafone (VOD) will not sell part of its 45% stake in Verizon Wireless to Verizon (VZ) for $10 billion. It has the contractual right to do so, but that ends this week. According to Reuters, some analysts believe that position is worth $45 billion.
Vodafone clearly thinks Verizon Wireless has a bright future. In the latest quarter, According to its 10-Q, Verizon’s wireless business had revenue of $10.8 billion and $3 billion in operating income. Both numbers were significant increases over the figures in the same quarter last year.
Verizon has a market cap of $125 billion. If the Vodafone piece of Verizon Wireless is worth $45 billion, that would give the entire operation an enterprise value of $100 billion, or 80% of Verizon’s total.
Vodafone knows it has a card to play. It can either hold out to get substantially more money for its piece, or use it as a bargaining chip to own a large equity stake in Verizon. Since Verizon does not have $45 billion to buy-out Vodafone, it should be an interesting dance.
Douglas A. McIntyre can be reached at firstname.lastname@example.org. He does not own securities in companies that he writes about.