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All it took was a a few simple words from Verizon (NYSE:VZ) CEO Lowell McAdam in an interview yesterday in Las Vegas prior to this week’s massive Consumer Electronics Show. He simply indicated, regarding a buyout of Vodafone’s shares, that a deal is feasible. The knee-jerk response of speculative investors was as predictable as the actual physical response of a patient when a physician taps his leg with that little rubber mallet thingy just below the knee.
Mr. McAdam is a keynote speaker at the convention today, its opening day. Regardless, he has already dropped the bomb on the show during yesterday’s interview. From the appearance of the charts today investors seem to think it is a good deal that is going to happen.
Verizon and Vodafone established their joint venture known as Verizon Wireless in 2000. I recall that a psychologist, discussing relationship years ago, said that the best relationships begin when each party can fill a need that exists for the other. He also noted that relationships may deteriorate over time when either the need or the ability to fill it no longer exists.
When the Verizon Wireless relationship was conceived it enabled both companies to share development costs in a relatively new market sector. As the JV has prospered and become the leader in wireless, the original needs no longer exist for the company in which Verizon owns 55% and Vodafone the remaining 45%.
Verizon attempted a buyout of Vodafone shares in 2006, so McAdam confession is, in a way, old news. Nonetheless, it is an old story that has yet to close. Having declared Verizon’s interest in acquiring 100% interest in Verizon Wireless, McAdam toyed with the press when he told reporters that “I don’t feel compelled to go out and take action to make something happen.” On the other hand he said, “As things change in the environments that both of us operate in, if there is an opportunity, we would always be in the position to buy Vodafone out.”
It really is amazing when you consider the power that one man can have by saying a few well-chosen words. McAdam created a stir on two markets today, and he didn’t really say anything new. He must have enjoyed knowing what the response to his interview would look like. Reporters scurrying about. News being posted. Analysts pontificating. Investors trading. People trying to make a quick buck. It’s kind of like watching Benny Hill reruns. It’s the same joke over and over again. It’s kind of funny from the outside looking in. A lot funnier than Benny Hill, by the way.
It only took one or two purely speculative sentences spoken in Sin City USA to spark a turnaround in the share price of Vodafone (LSE:VOD). Vodafone shares were valued at 177.10 on 09 January 2012. After peaking at 191.20 on 08 August, they have continued to plummet, closing at 154.41 on 31 December.
