Verizon and Microsoft Deals Reshape Wireless Landscape

The short Labor Day workweek started with two significant purchases in the wireless world, with Verizon Communications and Microsoft making separate moves that will change the wireless landscape over the coming months and years.

Verizon Communications Acquires Complete Ownership of Verizon Wireless

On Monday, Verizon Communications announced they had reached a deal to pay $130 billion to purchase Vodafone’s 45 percent ownership stake in Verizon Wireless.  The purchase, the largest ever amount paid for the acquisition of a U.S.-based company, gives Verizon Communication complete control over Verizon Wireless.

“Today’s announcement is a major milestone for Verizon, and we look forward to having full ownership of the industry leader in network performance, profitability, and cash flow,” said Lowell McAdam, CEO of Verizon Communications.

Verizon Communications representatives noted the full ownership of Verizon Wireless would allow Verizon to remain competitive in the expanding cell phone market.  The Verizon purchase was likely driven at least in part by expansion from Sprint and T-Mobile in recent months, as those companies seek to gain ground on U.S. wireless leaders Verizon and AT&T.

“This transaction allows both Vodafone and Verizon to execute on their long-term strategic objectives.  Our two companies have had a long and successful partnership and have grown Verizon Wireless into a market leader with great momentum,” noted Vittorio Colao, CEO of Vodafone.

Microsoft Pays $7.2 Billion to Purchase Nokia Handheld Business

Only a day later, Microsoft announced their intention to purchase Nokia’s Devices & Services business and portfolio of patents for $7.2 billion.  The move is aimed to position Microsoft and their Windows Phone operating system to gain wireless market share from Google’s Android operating system and Apple’s iPhone.’

A joint statement released by Microsoft CEO Steve Ballmer and Nokia CEO Stephen Elop noted the following:  “With the commitment and resources of Microsoft to take Nokia’s devices and services forward, we can now realize the full potential of the Windows ecosystem, providing the most compelling experiences for people at home, at work, and everywhere in between.  We will continue to build the mobile phones you’ve come to love, while investing in the future—new phones and services that combine the best of Microsoft and the best of Nokia.”

Microsoft noted they will still license the Windows Phone operating system to cell phone manufacturers outside of those produced by Nokia.

The purchase must still be approved by Nokia’s shareholders.

Consumer Impact of Acquisitions

The initial take on both moves is that they will be good for consumers.  Verizon and Microsoft are both expected to realize improved cash flow post acquisition.  Profits that Verizon and Microsoft previously had to share with Vodafone and Nokia, respectively, can now be plowed back into communication infrastructure and research and development.

For consumers, this should mean improved communication speeds and new feature sets and technologies.  Given the substantial competition that remains from wireless carriers AT&T, Sprint, T-Mobile, and other niche players, as well as from Samsung, Apple, and other handset manufacturers, the moves do not appear to give Verizon or Microsoft sufficient control of either the wireless or handset markets to raise prices on consumers.

In the end, Verizon’s and Microsoft’s competitors will have to work to keep pace with as they drive to further distinguish themselves from their competition, which should give consumers plenty of new wireless toys to enjoy for years to come.

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Mark

Mark has been a contributor to legal web sites related to bankruptcy, tax, and criminal law since 2011. He has an Accounting degree from Texas A&M University.