AT&T Power Grab May Jolt Verizon into Action

AT&T Power Grab May Jolt Verizon into Action
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News Analysis: Industry experts suggest that AT&T's bold move to merge with BellSouth could encourage rival Verizon Wireless to purchase Vodafone's minority stake in its operations.Keeping up with the Joneses never sounded so expensive.

As the telecommunications market began to digest the enormity of AT&Ts massive $64 billion bid to buy out rival BellSouth, one of the issues rising to the top of the evolving competitive landscape is the notion that the proposed merger could persuade Verizon Wireless to attempt to buy out Vodafones 45 percent minority stake in its business.

Its little secret that Verizon has considered making such a move for some time, and that Vodafone shareholders have periodically questioned the firms interests in sticking with the investment, which clearly concedes much of the power of running the wireless carrier to its partner that shares the ventures name.

Verizon Wireless has been a joint venture since its inception in 1999 when Vodafone and Bell Atlantic first introduced the $70 billion enterprise to the world. The company was initially made up of the two partners existing U.S. wireless operations.

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Parent company Verizon Communications has done little to discourage the idea of a new deal with Vodafone, with a late January report in the United Kingdoms Financial Times quoting Chief Executive Ivan Seidenberg as saying that his company would like to increase its stake in Verizon Wireless, with the executive not ruling out the potential for an outright buyout.

Vodafone has also done little to hide its openness to potentially parting with the investment in Verizon Wireless, which experts say has benefited both parent companies but also remains something of a conundrum based on the two firms commitments to different underlying wireless technologies.

In 2004, Vodafones board conceded that it was considering a bid for AT&T Wireless, a plan that very likely would have involved the company selling off its stake in Verizon Wireless in order to pony up enough cash to do such a deal. AT&T Wireless was eventually purchased by rival Cingular Wireless for roughly $41 billion. Notably, Cingular is a joint venture controlled by AT&T and BellSouth.

Vodafone has also moved away from some of its non-European interests in recent days, with Chief Executive Arun Sarin saying the week of Feb. 27 that the firm is actively working to sell a majority stake of its Japanese business unit.

Reached for comment, Vodafone spokespeople said nothing has changed regarding the carriers view of its Verizon Wireless investment, calling the operation a "great asset in a high-growth market" that has greatly benefited the firm.

Verizon representatives didnt immediately return calls seeking comment on the matter.

A Verizon Wireless spokesperson deferred comment on any ownership issues to firms parent companies, but said the carrier does not plan to change anything about its business based on the proposed AT&T-BellSouth union that will consolidate control of Cingular if completed.

Experts said, however, that the AT&T deal undoubtedly puts some pressure on Verizon to make a move and take over full control of the wireless firm. Kitty Weldon, analyst with researchers Current Analysis, in San Diego, said Verizon and Verizon Wireless will need to come up with some sort of response to AT&T-BellSouth to stay competitive.

Next Page: Verizons options and advantages.

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