Verizon's $5 Billion Power Play

SAN FRANCISCO (08/25/2000) - Verizon Corp. filed Thursday to issue up to $5 billion in common stock in an initial public offering of its wireless division, marking the latest chapter in the high profile and volatile history of this young company.

Following on the heels of an 18-day strike by some 85,000 Verizon employees, this may not seem the most auspicious time for the company to dive into the public markets. After all, competitor AT&T Corp. Wireless priced its shares at $29.50 when it debuted its wireless tracking stock in May, only to close at a measly $31.63. Hardly the rocket-ship ride a company hopes for when putting an established, profitable and arguably well-run business in a hot growth market into the public markets.

Simply put, Verizon has little choice but to spin off its wireless assets right now. Verizon, the nation's largest wireless provider, may have settled a strike with its old-economy employees, but the company's best hope of attracting Internet professionals needed to run a successful new wireless network is through stock options. And no major carrier wants to carry the debt burden it would take to finance new wireless networks. Only a solid IPO could generate that amount of cash. Sprint Corp. (FON) is considered the ideal model for wireless companies. It went public in 1998 and proved that a tracking stock is a great tool for unlocking the value of wireless assets.

Verizon is the new wireless carrier of Verizon Communications formed out of Vodafone and the merger earlier this year of Bell Atlantic and GTE.

With the right financial support, Verizon Wireless could be very successful. So far, Verizon's near ubiquitous national ad campaign has the company in a headlong charge at competitors, including Sprint PCS and AT&T Wireless. The full-service U.S. wireless market is still very much in its infancy and no one has figured out yet how to take control, but so far Verizon gets high marks.

"Verizon has been well influenced by European carriers like Vodaphone," says Andrew Cole, an analyst with Renaissance Strategy. "They've made strong moves with their wireless portal and wireless Internet while others have sort of tiptoed in."

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