`It Was Now or Never’ on Vodafone Deal: Chaplin

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Sept. 03 (Bloomberg) –- Bloomberg’s Cristina Alesci and New Street Research Analyst Jonathan Chaplin discuss Verizon’s $130 billion deal with Vodafone. They speak with Stephanie Ruhle and Erik Schatzker on Bloomberg Television's "Market Makers." (Source: Bloomberg)

They are talking about syria.

We brought you some of the president's comments last hour.

As soon as john boehner, nancy pelosi, and mitch mcconnell make themselves available, they will probably make comments and we will bring that to you live.

We are talking about the largest the tip -- deal in more than a decade.

Verizon has been trying to get this done for a decade.

But why?

Why or what does getting vodafone wireless deal for verizon that they could not do with a partnership?

We are joined by our guest who raised his target on the strength of this acquisition.

We are also joined by our reporter cristina alesci.

We will start with you.

They look at a 10% increase in earnings, and that is great, right?

I'm not discounting that.

There is an element of that in every deal.

If you look at the strategically going forward, where is the organic growth going to come from?

One clue is in the structure of this yield.

You have a lot of debt being issued to him and you have, based on my reporting, i'm sorry -- i'm getting my deals mixed up.

Verizon is very keen on reducing that debt level.

And one of the reasons that might be is the acquisition going forward outside of wireless, but being able to basically provide services that push verizon wireless beyond the hype that it is today.

That is a commodity.

It will become more and more commoditized.

On the heels of this we will see the world largest corporate bond issuance ever.

Does any of this timing have to do with rate and where they are, getting it yield done now?


We all thought this deal would come a lot sooner.

It was clear there was a window and it was narrowing.

As you point out, this will be the biggest corp.

Bond issuance ever.

It was now or never.

They had to get this done.

Is there an appetite for this corporate deal?

That is a question.

They have brought this deal backstopped by a group of banks, led by j.p. morgan.

This will be led internationally.

I think it seems like it is very likely they will get this amount of debt changed without too much difficulty.

There is the question of how much it will cost them.

The accretion dilution they put out there is $.10. i think that is conservative.

It assumes they will be raising debt at the normative six percent used on the analysis, and we think that they will probably do better than that.

And how should the equities feel about this on the debt side?

I think equity holders should be nervous.

We're not recommending the stock.

One of the reasons for that is the debt in the picture.

We have just come out of time -- the time where it was a really good.

For -- a really good time for services in general.

At&t and verizon have had a real run at the industry for years.

Now there is competition coming down the pike, and that is essentially what they can provide, some of the force behind the need to do these deals.

But isn't verizon wireless bill a cash monster even with this acquisition?

For the next couple of years, it's not going to be a cash monster, and that creates the most interesting part of this deal, what is going to happen next.

It will be interesting when they paid down the debt and they will be a cash monster knowing kingdom heat against.

-- a cash monster no one can compete against.

Why won't it be a cash monster?

Because they will be paying down the debt.

They are getting to an incremental $7 billion of free cash flow through this deal.

They will spend that cash paying down debt for the next couple of years.

That creates a window of opportunity for other players who might want to get -- a window of opportunity for other players?

It was an inside.

Who could be next?

We think this could be next.

We upgraded dish on thursday.

This puts dish and play.

The reason for it is they have the biggest block of unused spectrum available to the market.

Whoever gets that spectrum -- could verizon have bought dish?

It did not want to buy dish.

We will see what the fcc has to say about that.

Quite that is the other issue, right?

You look at at&t, and it says it wants to be more in europe.

Why would they go into a low- margin market at this point?

That is because all of these guys are grasping for growth.

That part of the challenge here in the u.s. -- now, could dish become an acquisition target?


If they cannot do a deal themselves.

They tried.

They tried to buy sprint, right?

If dish words to get a deal with directv, i think that creates obscene amount of value for both companies.

Do you think i could -- they could?

I think they could.

I think that the deal would never get to the doj.

Certainly the american airlines deal puts more of a question around that.

Going back to the bond market , if they can't get this deal

This text has been automatically generated. It may not be 100% accurate.


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