VZW: Recalculating the Value of Mobility
Back in March, I commented on the reported price being negotiated by Verizon and Vodafone for the portion of Verizon Wireless owned by Vodafone. I used those numbers to calculate the premium value for Verizon Wireless compared to the non-mobile part of Verizon.
This week, these negotations are back in the news, with Vodafone reportedly holding out for $50B for its 45% of Verizon Wireless. That translates into a total value of $111B for all of Verizon Wireless, or $61B for the portion owned by Verizon. The market cap for all of Verizon is about $96B, meaning that the value of the wireline portion of Verizon is only about $35B.
Verizon had $42.8B in wireline revenue in 2005, and Verizon Wireless had $32.3B in wireless revenue in 2005.
In other words, each dollar of wireline revenue is worth 83 cents in market cap, while each dollar in wireless revenue is worth $3.44. Or, summarized once more, each dollar of mobile revenue is worth more than four times each dollar of non-mobile revenue.
As I said in March, there’s bunches of factors that influence these valuations, but I prefer the simple explanation of it being a case of the Law of Mobility in action. What do you think?
May 10th, 2006 at 7:05 am
Two related, but different financial concepts probably got mixed up here. Market cap of $96B is for VZ’s Equity Value, which is different from Enterprise Value. VZ has about $34B Debt, adding that to Equity Value gives us VZ’s Enterprise Value of $130B. Of the $130B, $61B goes to Wireless, the majority of the remaining $69B should go to Wireline (assume 80%), with the rest goes to its Directory biz. This shows about $1.3 enterprise value per $ of wireline rev, and $3.4 enterprise value per $ of wireless rev. Again, the law of mobility works here, although at a little bit adjusted down scale