T’S IMPOSSIBLE not to be impressed by a deal this big – the third-largest corporate acquisition ever. But the scale shouldn’t blind us to the challenges Vodafone will face without its 45 per cent interest in Verizon Wireless.
Vodafone’s 2013 annual report shows just how stark the problem is: the report shows an adjusted operating profit from the Verizon Wireless stake of £6.4bn. That compares to operating profits of £2.1bn in northern and central Europe and £1.8bn in southern Europe. Vodafone sees its future in fast-growing emerging markets, but in the last year Africa, Middle East and Asia Pacific together brought in £1.7bn. In other words, combine all other regions and the Verizon stake was still more profitable.
Not any more. The immediate cash bonanza will be welcome, but Vittorio Colao has to think carefully about how to spend it. He cannot afford to be too swayed by shareholders wanting their cut. Vodafone has killed its cash cow; now it has to find a replacement.