Verizon/Vodafone Potential Deal a Big Positive For Canadian Telcos

Find out if this Fool thinks a potential Verizon/Vodafone deal means Verizon will be put off the scent of the Canadian market.

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The Motley Fool

As we discussed yesterday, the early summer news that U.S. giant Verizon (NYSE:VZ) potentially has its eyes on the Canadian wireless market sent the share prices of this country’s big 3 wireless providers, Rogers (TSX:RCI.B), Telus (TSX:T) and BCE (TSX:BCE), spiralling.

This potential however has seemingly been dialed back with today’s news.  Marking today’s headlines are rumours that Verizon and Vodafone may be in the process of negotiating a deal that would see Verizon acquire the 45% of Verizon Wireless that it doesn’t own.  The potential price tag – a mere $130 billion!  This amount makes the $3 billion or so some estimate it might cost Verizon to get up and running in Canada look like jelly bean money.

Implications

Given the reaction that Canadian telco stocks have had to this news, this has been a welcomed development by Mr. Market.  All 3 are flashing green, with Rogers and Telus leading the way with 3% gains each thus far today.

The market is assuming that a potential VZ/VOD deal may limit Verizon’s capacity to pursue the Canadian market.  Music to the ears of the Canadian telcos who have waged a PR war against this possible competitive threat all summer long.

As indicated however, if a company has the financial where-with-all to pull off a $130 billion deal, would it really even think twice about taking on another $3 billion opportunity?

Even though the market seemingly disagrees, in this Fool’s opinion, today’s announcement hasn’t really altered Verizon’s (potential) stance on Canada.  If the opportunity here fits their eye, it’s likely they’ll come up with the money to make a go of it.

Foolish Takeaway

If nothing else, the PR campaign that the Canadian telcos’ have waged has stirred the emotions of Canadians.  Time will tell however if this has an impact on the Canadian government which stands as the gatekeeper to this whole ordeal.  If the Government stands by its desire to have a significant 4th player in this country’s wireless sphere, and the business case makes sense, Verizon is unlikely to let this potential deal with Vodafone get in the way.

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Fool contributor Iain Butler does not own shares of any companies mentioned at this time.  The Motley Fool doesn’t own shares in any of the companies mentioned.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

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