Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Verizon Communications Inc. (VZ) Must Think Long Term on Wind Mobile

Page 1 of 2

According to recent reports, Verizon Communications Inc. (NYSE:VZ) wants to acquire Canadian wireless telecommunications company, Wind Mobile. The company seeks to make an entry into the Canadian telecommunications industry by acquiring one of its struggling domestic players. AT&T Inc. (NYSE:T) and Britain’s Vodafone Group Plc (ADR) (NASDAQ:VOD) are also reported to be interested in venturing in the Canadian market. If Verizon Communications Inc. (NYSE:VZ) seals the deal with Wind Mobile, this will be a return to the country following its initial spell as a majority shareholder of Telus Mobility, which ended in 2004.

Verizon Communications Inc. (NYSE:VZ)

The opportunity

The acquisition of Wind Mobile would result in some revenue for the U.S.’s second-largest telecommunications company. However, the significance of the benefits compared to the amount of capital, effort, and time devoted to the process may raise some questions.

Apparently, Canada will only allow a foreign company to acquire a domestic company if the domestic company accounts for less than 10% of the market share in the industry in which it operates. Wind Mobile’s market share in the Canadian mobile telecommunications industry is well below that threshold at just 2.23%, which paves way for bidders to place their offers.

Wind Mobile has only 601,719 subscribers, as compared to Verizon Communications Inc. (NYSE:VZ)’s 100 million. The company’s average revenue per user stands well below that of the three heavyweights at just $27.60 per month as reported for 1Q13. Based on the 601,719 subscribers, that would translate to revenue of just $49.83 million for the most recent quarter. When compared to Verizon Communications Inc. (NYSE:VZ)’s $20 billion plus, this is nothing more than a balancing figure.

According to analysts, Verizon Communications Inc. (NYSE:VZ) would spend at least $2 billion for spectrum purchases, network upgrades, and consolidation costs. Assuming constant revenue throughout the next three quarters, Wind Mobile would report just under $200 million for the year. This means that, based on the current figures, it would take ages for Verizon Communications Inc. (NYSE:VZ) to recoup its investment.

However, Verizon’s acquisition may also mean giving Wind Mobile some muscle to compete with the domestic elite. The company’s LTE network could be a key factor in boosting Wind Mobile’s monthly ARPU and subscriber base. This is the only window of opportunity for Verizon. Otherwise, there is no immediate gain. A Verizon spokesperson told Bloomberg that Wind Mobile is just one of the various options the company has for an investment.

“Wind Mobile is ‘one of many’ options under consideration, Bob Varettoni, a spokesman for Verizon, said in an e-mail. ‘We constantly evaluate a wide variety of business opportunities.’ “

This, therefore, means that in as much as the interest remains real, chances of placing a bid for Wind Mobile will depend on a cost-versus-benefit assessment of the available options. Meanwhile, Verizon remains strong fundamentally, with wide margins and double-digit earnings growth rates.

Page 1 of 2

Biotech Stock Alert - 20% Guaranteed Return in One Year

Hedge Funds and Insiders Are Piling Into

One of 2015's best hedge funds and two insiders snapped up shares of this medical device stock recently. We believe its transformative and disruptive device will storm the $3+ billion market and help it achieve 500%-1000% gains in 3 years.

Get your FREE REPORT and the details of our 20% return guarantee today.

Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.
Loading Comments...

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 102% in 3 years!! Wondering How?

Download a complete edition of our newsletter for free!