Analysis: Japanese Unit Sold, Vodafone Considers Its Verizon Wireless Stake

In the wake of the Vodafone Group's sale of its Japanese unit to SoftBank, the U.K.-based mobile wireless firm can turn its attention to its 45 percent interest in Verizon Wireless. Verizon has indicated it would be open to acquiring Vodafone's share of the highly profitable U.S. unit.

At the same time, Qwest Communications International, one of the three remaining Baby Bells, has been receiving stock market attention as a potential takeover candidate by either Verizon Communications or AT&T. Qwest's stock hit a four-year high Thursday on speculation that the Denver-based firm could be an acquisition candidate, either by a telecommunications company or by a buyout firm.

Pete Wilson, vice chairman of telecommunications consultancy Telwares, said in an interview that Qwest's interest to Verizon Communications would be primarily to keep it away from archrival AT&T. But Verizon is said to still harbor a bad taste about Qwest, because the latter firm drove up the price for MCI, for which Verizon had to pay $8.6 billion after a spirited bidding contest took place between the two firms.

Although Vodafone is in line to receive $11.9 billion in cash for its Japanese division, that sum is still well below the $40 billion to $49 billion impairment charge that Vodafone announced in recent days. A sale of its stake in Verizon Wireless combined with the Japanese deal would likely wipe out the impairment charge.

Another reason for Vodafone to sell its Verizon Wireless ownership is that the U.S. firm's base technology -- Qualcomm's CDMA2000 -- is different and generally incompatible with Vodafone's technology of choice. Vodafone, while it uses key elements of Qualcomm technology, is based on the European-built GSM standard. One reason Vodafone's Japanese unit struggled is that the CDMA2000 standard used by KDDI was poaching on Vodafone's customers.The GSM providers, which dominate in user numbers, have been moving aggressively to catch up in network robustness in recent months. As for Verizon Wireless, it is now facing a tough challenge from Sprint/Nextel, which is rolling out its own version of CDMA2000 and Verizon could move quicker if unencumbered by a partner.