Which company could benefit most?
The first company that comes to mind is Alcatel Lucent SA (ADR) (NYSE:ALU), which is a European-based telecom equipment company with more than 30,000 patents that operates in seven segments of the telecom space in all major countries.
Due to Alcatel Lucent SA (ADR) (NYSE:ALU)’s market cap of just $6 billion, most don’t realize the pure size of this company, having revenue of almost $19 billion in the last 12 months. Nearly half of Alcatel Lucent SA (ADR) (NYSE:ALU)’s annual sales come from the Americas, but the company does have a large presence in other markets such as Asia Pacific (18% of sales), Europe (26% of sales), and the Middle East and Africa (7% of sales ).
Alcatel Lucent SA (ADR) (NYSE:ALU) is making large investments in markets outside the U.S., but up until this point, most have not paid off. The company has just 23% of its 70,000 employees in North America, while 57% are in Europe and Asia, which are continents where Vodafone might look to expand rapidly.
Due to its operational reach, Alcatel Lucent SA (ADR) (NYSE:ALU) looks best-positioned to benefit from the large cash position that Vodafone will receive. And with such a cheap market capitalization relative to sales, we might even see Vodafone stretch further and acquire the telecom equipment company.
Vodafone Group Plc (ADR) (NASDAQ:VOD) is acquisitive by nature, and such an acquisition would add revenue and position Vodafone to expand rapidly in emerging markets.
Final thoughts
Last year, AT&T announced that it would spend $22 billion on capital expenditures for each of the following three years, which is a $3 billion rise compared to 2012. Telecom stocks rallied in response. But the potential increases in capital expenditures for Vodafone are unprecedented.
The $60 billion in new money coming into the sector is a game changer, and extremely important for those companies who could earn some of that money. Surprisingly, global telecom equipment makers are not trading significantly higher on the Verizon/Vodafone acquisition news.
It’s hard to imagine that Alcatel Lucent SA (ADR) (NYSE:ALU) and other global equipment companies would not earn some of the $130 billion that Verizon Communications Inc. (NYSE:VZ) is paying to Vodafone. Clearly, this is great news for such companies, and it’s news that the market is apparently not noticing.
The article An Unsung Beneficiary of This $130 Billion Acquisition originally appeared on Fool.com and is written by Brian Nichols.
Brian Nichols is long Verizon. The Motley Fool recommends Vodafone.
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