With its $130 billion purchase of Vodafone’s 45% stake in Verizon Wireless now complete, Verizon Communications not surprisingly said it expects to expand margins and grow revenues in 2014.
Verizon’s management said the deal will boost earnings per share by 10%; increase consolidated revenues by 4%; and expand earnings before interest, taxes, depreciation and amortization margins. However, taxes and interest expenses are expected to also increase and Verizon said it will not receive a dividend connected to the sale of its stake in Italian telecommunications provider Omnitel to Vodafone as part of the Verizon Wireless transaction. Verizon added that it expects to spend between $16.5 billion and $17 billion on capital expenditures in 2014, and spend $1.2 billion funding its pension program.
Verizon posted $4 in earnings per share in 2013; consolidated revenues increased by 4.1%; and a consolidated operating income margin of 26.5% and adjusted consolidated EBITDA margin of 34.9%.
Verizon announced late last week the closing of the Vodafone deal, completing a transaction that was announced last September. The deal consisted mostly of cash and shares in Verizon, with Verizon forking over $58.9 billion in cash and $60.2 billion in stock. In addition, Verizon issued $5 billion in notes payable to Vodafone; sold its 23% interest in Vodafone Italy for $3.5 billion, thereby providing Vodafone with full ownership of Vodafone Italy; with the remaining $2.5 billion of the transaction value a combination of “other considerations.”
The deal provides Verizon Communications with full control of its domestic wireless operations, which have become an increasingly important driver to the telecom operators overall financial performance. Verizon Wireless generated two-thirds of Verizon’s total revenues for 2013, however 45% of the profits then went to Vodafone.
Verizon also announced that a recently formed product development and management organization will look to leverage the company’s newly bolstered assets to develop products taping into its wireless, wireline, IP and cloud networks and platforms. Former Verizon Wireless EVP and COO Marni Walden has been named to lead the organization.
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