Who Controls Verizon Wireless?

There is upheaval afoot in the telecom landscape -- again.

There's tension within Verizon Wireless as co-owners Verizon Communications (NYSE: VZ  ) and Vodafone (NYSE: VOD  ) have different opinions on what the American wireless giant should do. Vodafone wants dividend payments out of the fat cash streams produced by Verizon Wireless, but Verizon holds 55% of the venture and prefers to pay off debt first. The bigger bully makes the rules, so no cash flows in to Vodafone.

This week, London's Daily Telegraph reports that the debt rebalancing is nearly complete -- which gives Vodafone a much stronger negotiating position. The heads of the companies have reportedly been talking strategy, recently, but nobody knows exactly what will come of it. Some telecom analysts now see Vodafone forcing Verizon's hand into sharing the wireless wealth through finally having the wireless unit pay out a dividend, but others think an outright all-stock merger between Vodafone and Verizon looks more likely. A third option wherein Verizon buys out Vodafone's share of Verizon Wireless is improbable because Verizon just ain't that rich and the tax hit to Vodafone would be too large.

The American market for wireless communications has never been particularly stable. Remember Cingular Wireless, itself an agglomeration of networks that included AT&T (NYSE: T  ) Wireless, SBC Communications, BellSouth Mobility, and Pacific Bell Wireless? Yeah, that's the AT&T wireless you see selling Apple (Nasdaq: AAPL  ) iPhones today. Alltel Wireless ruled the fifth largest wireless network in America, but is now a subservient part of Verizon Wireless. Sprint swallowed Nextel in 2005 to conjure up the Sprint Nextel (NYSE: S  ) hydra and a buyout of prepaid service specialist Virgin Mobile USA is pending. Things move quickly around here, and another big-time merger is surely not out of the question.

The path of least resistance speaks for some simple dividend payouts, but Vodafone certainly has the global ambition and wherewithal to pull off a high-stakes merger with Verizon. Vodafone also boasts much higher net profit margins than Verizon -- perhaps a merger would bring about tighter operations and separate landlines from wireless once and for all.

Anything is possible, but the telecom sector is never boring. What should Verizon do with those nosy Brits? The comment box below is dying to hear your opinion.

Fool contributor Anders Bylund he holds no position in any of the companies discussed here. Sprint Nextel is a Motley Fool Inside Value selection. Apple is a Motley Fool Stock Advisor pick. Try any of our Foolish newsletters today, free for 30 days. You can check out Anders' holdings and a concise bio if you like, and The Motley Fool is investors writing for investors.


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  • Report this Comment On March 30, 2010, at 4:10 PM, conradsands wrote:

    Verizon and AT&T = The Most Expensive Wireless Calling Plans in America

    Wireless Profit Margins:

    Verizon Wireless = 45 percent

    AT&T = 39 percent

    Sprint = 18.2 percent

    Now we know where Verizon and AT&T get all that money to run commercials 24x7, pay out huge executive bonuses and hire armies of lawyers and lobbyists -- the American consumer.

    Not all pricing claims are the same. The advantages consumers get with Sprint’s $69.99 Everything Data plan include nationwide unlimited text and picture messaging, unlimited Web, unlimited GPS navigation and unlimited calling to any mobile in America, compared to AT&T and Verizon’s $69.99 pricing plans, which are good for unlimited talk only. And Sprint’s $69.99 plans are available with any phone while AT&T and Verizon’s are limited to lower-end phones.

    AT&T and Verizon have attempted to confuse the marketplace by lowering their pricing to $69.99, but theirs are for calling only. In today’s economic environment customers are interested in more than just voice pricing. They also want the best value for all the other things they rely on their wireless phone for and Sprint delivers. Sprint's Everything Data plans start at $69.99 per month and include Any Mobile, Anytime for unlimited calling with any U.S. wireless user, plus unlimited text, picture and video messaging, e-mail, Web browsing, social networking and more.

    4G wireless--which operates at speeds up to 10 times greater than today's 3G networks--could become a reality for many businesses and consumers over the coming year. Sprint, the current 4G leader, says it will introduce its first 4G smartphone before mid-year.

    Sprint’s fourth-generation phone -- the HTC EVO 4G -- will be available this summer and run Google's Android software.

    The phone also will be able to act as a mobile hotspot, allowing customers to connect up to eight Wi-Fi enabled devices. As a result, people could use the phone for their Internet connection for a laptop or desktop computer.

    Where 4G isn't available, the phone will use Sprint's 3G network. It will be available through all the usual Sprint channels and RadioShack, Best Buy and Wal-Mart.

  • Report this Comment On March 30, 2010, at 4:10 PM, conradsands wrote:

    Verizon and AT&T = The Most Expensive Wireless Calling Plans in America

    Wireless Profit Margins:

    Verizon Wireless = 45 percent

    AT&T = 39 percent

    Sprint = 18.2 percent

    Now we know where Verizon and AT&T get all that money to run commercials 24x7, pay out huge executive bonuses and hire armies of lawyers and lobbyists -- the American consumer.

    Not all pricing claims are the same. The advantages consumers get with Sprint’s $69.99 Everything Data plan include nationwide unlimited text and picture messaging, unlimited Web, unlimited GPS navigation and unlimited calling to any mobile in America, compared to AT&T and Verizon’s $69.99 pricing plans, which are good for unlimited talk only. And Sprint’s $69.99 plans are available with any phone while AT&T and Verizon’s are limited to lower-end phones.

    AT&T and Verizon have attempted to confuse the marketplace by lowering their pricing to $69.99, but theirs are for calling only. In today’s economic environment customers are interested in more than just voice pricing. They also want the best value for all the other things they rely on their wireless phone for and Sprint delivers. Sprint's Everything Data plans start at $69.99 per month and include Any Mobile, Anytime for unlimited calling with any U.S. wireless user, plus unlimited text, picture and video messaging, e-mail, Web browsing, social networking and more.

    4G wireless--which operates at speeds up to 10 times greater than today's 3G networks--could become a reality for many businesses and consumers over the coming year. Sprint, the current 4G leader, says it will introduce its first 4G smartphone before mid-year.

    Sprint’s fourth-generation phone -- the HTC EVO 4G -- will be available this summer and run Google's Android software.

    The phone also will be able to act as a mobile hotspot, allowing customers to connect up to eight Wi-Fi enabled devices. As a result, people could use the phone for their Internet connection for a laptop or desktop computer.

    Where 4G isn't available, the phone will use Sprint's 3G network. It will be available through all the usual Sprint channels and RadioShack, Best Buy and Wal-Mart.

  • Report this Comment On March 31, 2010, at 11:42 AM, MizzouFanVan wrote:

    Thanks for the ad, conradsands - I think I'll go switch to Sprint. What a compelling argument. Oh wait - that's not what this article is about? Hmmm.

    Anders, to your point - this could go any number of ways. All I know about telecom is they are always keen to pile on more debt, and that you (as an investor) should never own any of their stocks unless you like living on the edge.

    On a tangential note, I do enjoy the AT&T/Verizon fight ads - AT&T currently has the advantage in my opinion. Now if only these telecom companies would concentrate on good cell reception. Shouldn't they be phone companies first?

  • Report this Comment On November 10, 2011, at 5:04 PM, 415el wrote:

    Don't do business with Verizon Wireless, they're crooks. Scammers.

  • Report this Comment On November 10, 2011, at 5:05 PM, 415el wrote:

    I will never do business with VZ ever.

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