Vodafone Once Tried to Buy AT&T. Will AT&T Now Buy Vodafone?

Verizon Communications denies the rumor, but reportedly had been considering a deal of as much as $245 billion to buy all of Vodafone. 

That deal, which Verizon would make with AT&T, would then have Verizon getting the U.S. assets, while AT&T got the rest of Vodafone's global assets.

That rumored deal would allow Verizon Wireless to fully own its own business, but might have even bigger implications for AT&T.

Vodafone is the second-largest global mobile communications company, with approximately 403 million customers in its controlled and jointly controlled markets.

Vodafone currently has equity interests in over 30 countries across five continents and more than 50 partner networks worldwide.

So even after losing the Verizon Wireless customers and assets, AT&T would still stand to expand in a major way as a global carrier. Any sale of Vodafone to the U.S. mobile giants would end speculation about “who will buy whom,” and not just for Verizon and Vodafone.

In September 1999, Vodafone Airtouch announced a $70-billion joint venture with Bell Atlantic Corp., which gave rise to Verizon Wireless. That partnership has been troubling for both partners, in some ways. leading to periodic rumors about one or the other partners buying out the other.

AT&T also figures into the story, though. In 2004, Vodafone made a bid for the entirety of AT&T Wireless when that company was for sale.

Had that bid been successful, Vodafone presumably wouldhave sold its stake in Verizon Wireless, and then rebranded the former AT&T Wireless business as Vodafone.

Cingular Wireless, at the time a joint venture of SBC Communications and BellSouth ultimately outbid Vodafone and took control of AT&T Wireless, which now is known as AT&T Mobility.  

So in an odd turn of events, Vodafone, which tried to buy AT&T Wireless, would then be acquired by its former target.

Earlier rumors (2012 and 2013) had Verizon Communications weighing a smaller deal to acquire more of Verizon Wireless equity, or buying out Vodafone’s stake.

The latest rumor has the two U.S. giants buying all of Vodafone, with Verizon essentially acquiring the remainder of Verizon Wireless, while AT&T gets the rest of Vodafone’s global assets.

Such a blockbuster deal would give the two U.S. mobile service providers a pathway to growth. For Verizon Communications, owning all of its mobile business would immediately boost earnings. For AT&T, the Vodafone deal would catapult AT&T into the global market in a new way.

Despite denials, it appears Verizon and Vodafone recently held full merger talks that apparently did not result in accord on matters such as leadership structure or where the corporate headquarters would be located. That is a common issue for mergers “of equals.”

So the recent rumor that AT&T and Verizon would instead simply buy all of Vodafone is a way around the impasse.

Strategically, the AT&T interest in Vodafone’s global assets is a clear sign that AT&T sees future growth in the U.S. market as problematic. Verizon first has to consolidate its U.S. business before it can consider looking overseas for future growth.

Ironically, any such deal would tend to confirm the belief of European mobile service providers that major consolidation is needed in the European Union markets if the surviving mobile service providers are to achieve economies of scale.

But the deal also would indicate that when government entities limit the amount of growth any single company can have in its home market, typically by mandating market share limits, those firms look offshore for future growth.

Ironically, by limiting domestic market share to preserve competition, regulators also create incentives for domestic providers to shift capital overseas.