Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



Vodafone Passes on Verizon

Speculation about possible takeover attempts seems to be mushrooming on Wall Street these days. Investors got an earful early this week, with unofficial reports that global wireless operator and Motley Fool Inside Value selection Vodafone (NYSE: VOD  ) was interested in coughing up a staggering $160 billion to acquire U.S.-based Verizon Communications (NYSE: VZ  ) . The rumor easily tops last week's conjectures about another foreign operator, Motley Fool Global Gains pick SK Telecom (NYSE: SKM  ) , buying struggling U.S. carrier Sprint Nextel (NYSE: S  ) .

As SK Telecom did with the Sprint Nextel rumor, Vodafone quickly denied any interest in acquiring Verizon. Still, investors bid up shares of Verizon almost 3% at one point on Monday, on volume 50% higher than average, showing that some investors took the speculation seriously. At the very least, the rumor renewed thoughts that someone might be interested in paying a premium for Verizon's assets.

But I have trouble coming to any logical line of reasoning that Vodafone -- a company heavily focused on wireless -- would swallow a telecom behemoth like Verizon lock, stock, and barrel. If such a deal were to happen, Vodafone would be managing a slow-growing fixed-line business with an aggressive -- and capital-intensive -- deployment plan for Verizon's broadband-via-fiber-optics service, FiOS.

While Verizon's wireless division is a gem of a property, Vodafone is not well-equipped to manage a huge push into next-generation broadband. The company itself espouses this strategy with regard to fixed-line operations: "We will continue to pursue a mobile centric approach, focusing on the core benefits to customers of mobility and personalisation, and will resell fixed line technologies only according to customer needs."

The company clearly has no acquisitive ambitions in the fixed-line space, and a deal to buy the fixed-line units, then promptly spin them off, would add significant risk and distraction to the core mobile business. Shareholders have been very vocal lately in encouraging Vodafone to stay away from any more risky acquisitions. While AT&T (NYSE: T  ) has shown some recent success in consolidating massive telecom acquisitions, Vodafone's recent ventures haven't worked out so well. It's taken huge write-offs in recent years.

While the rumored acquisition plan makes great headlines, and whips up a lot of speculation, it shouldn't fundamentally change the way investors view either company.

Vodafone is a Motley Fool Inside Value selection. To see what other stocks the market-beating service is recommending, check out a free 30-day trial today.

Fool contributor Dave Mock gets whipped up pretty easy, but falls from his high just as fast. He owns no shares of companies mentioned here. Dave is the author ofThe Qualcomm Equation. The Fool's disclosure policy tells it like it is.

Read/Post Comments (0) | Recommend This Article (4)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 531957, ~/Articles/ArticleHandler.aspx, 10/23/2016 11:02:06 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 1 day ago Sponsored by:
DOW 18,145.71 -16.64 -0.09%
S&P 500 2,141.16 -0.18 -0.01%
NASD 5,257.40 15.57 0.30%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

10/21/2016 4:00 PM
VOD $27.77 Down -0.05 -0.18%
Vodafone CAPS Rating: ****
VZ $48.20 Down -0.94 -1.91%
Verizon Communicat… CAPS Rating: ****
S $6.55 Down -0.17 -2.53%
Sprint CAPS Rating: **
SKM $21.80 Down -0.03 -0.14%
SK Telecom CAPS Rating: **
T $37.49 Down -1.16 -3.00%
AT and T CAPS Rating: ****