3 Potential Scenarios for Verizon Communications Inc. (VZ): Vodafone Group Plc (ADR) (VOD)

Take some stock
The third option for Verizon Communications Inc. (NYSE:VZ) and Vodafone is for Verizon to trade its own stock for Vodafone’s 45% stake in Verizon Wireless. For Verizon, this would dilute shareholders and, depending on the price, may not even add to earnings. Unless Verizon went on a massive share buyback campaign, it would likely be better off issuing debt at low rates and buying Vodafone Group Plc (ADR) (NASDAQ:VOD) than issuing stock. Still, this is one of the options for the two companies.

Implications across the industry
If Vodafone Group Plc (ADR) (NASDAQ:VOD) and Verizon become one company, it could create a company so well capitalized that it would dominate wireless around the globe. As I mentioned before, AT&T and Sprint are already having a hard time keeping up with Verizon Wireless’ superior network and this would only exacerbate the problem. In the fourth quarter, Verizon added a total of 2.2 million subscribers compared to 780,000 at AT&T and a loss of 243,000 at Sprint.

For phone makers, a larger Verizon Communications Inc. (NYSE:VZ) would also be problematic. Apple Inc. (NASDAQ:AAPL) was able to negotiate a sweetheart deal with AT&T to get the iPhone when it was first launched but it wouldn’t have the same power today. All carriers are trying to cut subsidies, leaving Apple with shrinking margins.

The article 3 Potential Scenarios for Verizon Wireless originally appeared on Fool.com and is written by Travis Hoium.

Fool contributor Travis Hoium manages an account that owns shares of Apple and Vodafone. The Motley Fool recommends Apple and Vodafone. The Motley Fool owns shares of Apple.

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