It has been a busy month at Verizon Communications, which acquired Vodafone’s 45 percent position in Verizon Wireless for $130 billion on Sept. 2. A little more than a week later, the carrier rolled out a bond deal that netted $49 billion.
The Vodafone deal, which doubled Verizon’s debt load, might have sucked capital away areas such as infrastructure development if it weren’t for carrier’s blockbuster bond sale, Thomas Engel, principal, Milestone Media Partners, told AGL Bulletin.
“I would think that the amount of money Verizon is paying to Vodafone would cramp their capital budget and possibly slow their LTE build out, thereby slowing some revenue growth for the tower industry,” Engel said. “On the other hand, if the $49 billion bond sale goes through at today’s interest rates, Verizon will probably have sufficient funds to do both.”
Verizon will pay Vodafone $58.9 billion in cash, which it will fund with a $61 billion bridge credit agreement with J.P. Morgan Chase Bank, Morgan Stanley Senior Funding, Bank of America and Barclays.
The bond deal, which was the largest corporate debt sale in history dwarfing Apples’ $17 billion offering last spring, goes a long way to help pay some of that money back.
“This issue, combined with giving Vodafone holders $60 billion of newly issued Verizon shares, and various other transactions, gets the whole deal paid for before long-term interest rates rise even more…” wrote Allan Sloan in CNN Money.
As a wholly owned entity, Verizon Wireless should be better equipped to take advantage of the changing competitive dynamics in the market, according to Lowell McAdam, Verizon chairman and CEO.
“The capabilities to wirelessly stream video and broadband in 4G LTE complement our other assets in fiber, global IP and cloud. These assets position us for the rapidly increasing customer demand for video, machine to machine and big data. We are confident of further growth in wireless, and our business in its entirety,” he said.