Whoop whoop. A potential mega deal between Vodafone and Verizon raises its head again. Headlines trumpet a $130 billion price tag and we’ll stick to the take the money and run view. Why? The Verizon Wireless(VZW) business is strongly performing now but the headlines are paying very little attention to the implied valuation of the rest of Vodafone’s older mobile empire.
Inclusive of circa £25 billion of net debt the total franchise value for Vodafone today is just over $180 billion. Take the speculated $130 billion for VZW off the table and there’s a $50 billion valuation implied for the controlled telecoms interests(ex Kabel Deutschland) of Vodafone. Hmmm…..that means those assets which generated almost $70 billion of sales and $9 billion of operating profits in 2012 are valued on very low multiples and implying pretty dismal expectations. That does not augur well for other mobile franchises around Europe as revenues and margins continue to slide….
Check out Vivendi’s SFR mobile division today; Q2 results show 11% revenue declines and a whopping 16% EBITDA (cash proxy) fall. In a nutshell, shareholders should be happy with a selling strategy particularly currently higher growth franchises like VZW because the future is, in a way, Orange and that’s not a good look as any European telecoms watcher will tell you.
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