Verizon will own its wireless business outright after agreeing to a US$130-billion deal to buy the 45 per cent stake of Verizon Wireless owned by British cell phone carrier Vodafone.
The buyout, the second-largest acquisition deal on record, would give Vodafone PLC additional cash to pursue its expansion ambitions in Europe.
Those ambitions include its push to buy up other cell phone providers, and to expand into the lucrative world of mobile services.
The deal announced on Monday would also give Verizon Communications Inc the opportunity to boost its quarterly earnings, as it would no longer have to share a portion of proceeds from the nation's No. 1 wireless carrier with Vodafone.
Verizon expects the deal to boost its earnings per share by 10 per cent once the deal closes. It also boosted its dividend.
The deal still requires approval by regulators and shareholders of both companies. It is expected to close in the first quarter of 2014.
It isn't expected to have much of an effect on Verizon consumers or on the company's operations. Vodafone had little influence on Verizon Wireless' day-to-day operations, and the two companies have kept out of each other's territory.
The Verizon-Vodafone partnership started in 2000, when what was then Bell Atlantic combined its East Coast wireless network with Vodafone's operations on the West Coast. Vodafone had entered the United States market a year earlier by outbidding Bell Atlantic to buy AirTouch Communications Inc of San Francisco.
The windfall from the buyout will give Vodafone, already one of the world's largest cell phone companies, substantial funds to buy other providers - or pay down its debt.
Last year, Vodafone spent US$1.6 billion in buying up UK telecoms group Cable & Wireless Worldwide and is pushing ahead with a US$10.2-billion takeover bid for Germany's biggest cable operator, Kabel Deutschland.
The Kabel deal will help Vodafone expand its foothold in Europe and gain 32.4 million mobile, five million broadband and 7.6 million direct TV customers in Germany. It has 19.2 million mobile customers in the UK, and it has been under intense competition.
"The proceeds from the sale, if not passed on in forms of dividends, could improve Vodafone's debt position following the recent Cable & Wireless and Kabel Deutschland deals, and provides Vodafone some leeway to further expand its network presence in Europe," said Ronald Klingebiel, telecommunications specialist at Warwick Business School.
"Such moves provide the capacity and level of integration necessary for competing effectively in a future pan-European market," he said.