Verizon's $130 billion acquisition of Vodafone's Verizon Wireless stake last week marked the biggest deal in communications history. What's even more interesting is the biggest bond financing in corporate history: Verizon sold $49 billion in debt yesterday to pay for the deal.

What to think of the deal? It's cynical financial engineering. It's dangerous. But it makes a lot of sense for Verizon. And it should scare everybody about the potential ramifications of the unintended consequences of the Federal Reserve's artificially low interest rates.

Verizon was clearly taking advantage of a low-rate environment to lock in cheap debt, selling $49 billion of bonds yesterday, issuing a mixture of bonds ranging from 3 years to 30 years in maturity. Interest rates on the debt ranged from 5.15% notes due in 2023 to 6.55% on debt due in 2043. In bond parlance, the spread on the rates over treasury rates was generally around 1.5%-2%.

Now, 2043 -- that's hilarious. What kind of iPhone will be sold in 2043, I wonder? 

It's by far the largest corporate debt issuance in history, dwarfing Apple's mere $17 billion in corporate debt issues in April. 

This entry was posted on Thursday, September 12, 2013 at 15:40 pm and is filed under Mobile, Infrastructure & SDN, Investing.
Keywords: Verizon, Vodafone, Debt, Federal Reserve, S&P, telecom

Don't look now, but there's another crisis in Europe -- a crisis in the telecom industry. Telecom Italia is under siege. So is Telefonica. Debt levels are high, dividends have been slashed, and break-up and spinout plans are being put into motion for several large European telcos.

That means it's time to buy. Here the logic: North American players such as AT&T are scrambling to pick up telecom assets, and they're likely to now look internationally. The prices of European assets are depressed.

Not to pick on Europe, but this is so 1982. It's time to break up all of the European telecom monopolies. Let's get rolling -- telecom breakups are fun. Look at what happened in the U.S. since the Ma Bell breakups in 1982: hundreds of independent telcos, some of them bankrupt and some of them wildly successful, massive growth and value creation as well as destruction. Think about it: McCaw Cellular, MCI, Worldcom! Telco deregulation was so much fun.

This entry was posted on Friday, July 19, 2013 at 09:29 am and is filed under Mobile, Technology, Infrastructure & SDN.
Keywords: European, Debt, Crisis, telecom, Telefonica, Telecom, Italia, AT&T