AT&T Deal To Spur Verizon Consolidation?
Since the AT&T – BellSouth merger this weekend, there has been lots of talk about how the deal puts pressure on the other telecom giants to try to reach a comparable scale. Notably, a discussion has come out on how Verizon Communications (VZ) now has increased pressure to buy the 45% of Verizon Wireless (VZW) that is owned by Vodafone, because VZ needs to regain full control of the subsidiary and consolidate turf. We are aware that VZ has wanted to buy back VZW for some time, but wouldn’t the ‘AT&T effect’ put pressure in the opposite direction? By spending all their capital on Vodafone’s share of VZW, VZ uses the capital that could otherwise buy Qwest, Alltel, etc. Yet a buyback would actually gain almost nothing in scale and control: VZ already has a controlling interest in in VZW (Vodafone has been a notoriously ignored minority owner – Vodafone was snubbed on the use of Live!, W-CDMA, and Java.), so there’s little benefit in control. Also, VZ can basically already count all the subs of VZW as ‘in the family’ and can offer a bundled triple-play to them, so there’s little benefit in raw sub numbers. Seems to me, if there is any ‘AT&T effect’ at VZ, it should be to avoid wasting resources buying back that which VZ already controls, and to consider buying one of the smaller remaining telcos.
