The End of a Wireless Anomaly

Verizon Wireless has always been a very strange beast. Its DNA incorporates the tangled history of the U.S. phone industry since the 1983 court-ordered breakup of the Bell System.

Verizon Communications, which will finally become its sole owner of Verizon Wireless as a result of a $130 billion deal announced Sept. 2, is itself the successor to several companies created by the  breakup. Verizon Wireless was born out of the merger of Bell Atlantic Mobile and GTE Mobile, both Verizon Communications subsidiaries, with AirTouch Plc, the one-time mobile unit of PacTel (which itself was later bought by SBC which became AT&T–I told you this was tangled.) AirTouch was owned by Vodafone, the big British mobile operator, and the deal created Verizon Wireless as a joint venture of which Verizon owned 55% and Voda 45%.

Customers can be excused if they thought Verizon Communications–which offers landlines, FiOS internet and television service, and business services–and Verizon Wireless were the same company. They used the same branding and offered unified ordering and billing. But they weren’t. The arrangement was particularly uncomfortable for Vodafone, whose 45% stake was a huge investment that gave it virtually no say in the management of the joint venture.

Vodafone will receive $59 billion in cash, $60 billion in Verizon Communications stock, and $11 billion in other consideration including Verizon’s stake in Vodafone Italy. Vodafone said it would distribute the  stock to its shareholders along with $24 billion of the cash. The remaining cash will be used for a “new organic investment program.”

The deal, which is subject to approval by shareholders of both companies and by US and UK regulators, is expected to close in the first quarter of next year.


Verizon, LTE, and the iPhone’s Future

At, Sascha Segan argues that Verizon Wireless may be pushing customers toward Android phones rather than the iPhone because it so badly needs to move customers from its overburdened 3G data network to its new and lightly used LTE network. This explains why Verizon is pushing Apple very hard to include LTE in the next iPhone, expected this fall.

Verizon hasn’t been shy about its preferences. It banished the iPhone from its booth at the Consumer Electronics Show because it was displaying only LTE models and I expect it to do the same at the CTIA Wireless show next week.

I argued back in March that Apple should leave LTE out of the iPhone for now because the iPhone does not badly need faster data and the LTE still imposes an unhappy battery life/processing power/size tradeoff. I suspect that reflects the thinking at Apple, which has never been very happy on the bleeding edge of technology.

But I’m not sure that even mighty Apple can resist the pressure it is getting from the most important carrier in its most important market. We’ll know in the fall.