Insight: Verizon, Vodafone CEOs talked in gym, agreed on price at breakfast

Mon Sep 2, 2013 8:15pm EDT
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By Sinead Carew and Soyoung Kim

(Reuters) - In the end, all it took was a workout session in the gym followed by conversation over breakfast at San Francisco's Four Seasons hotel for Verizon Communications Inc's Lowell McAdam and Vodafone Group Plc's Vittorio Colao to bridge a $30 billion, 10-year-long gap between their companies and strike the third-biggest corporate deal ever.

The two CEOs, who have known each other for 20 years and are close enough to have had dinner at each other's homes, had been in regular touch at least since the fall of last year about the fate of their Verizon Wireless joint venture, which was formed in 2000 and is now the No. 1 U.S. mobile carrier.

In an interview on Monday, McAdam said that he and Colao determined early on that they did not want to merge Vodafone and Verizon into one global telecom behemoth. The alternative - for Verizon to buy out Vodafone's 45 percent stake in Verizon Wireless - was more attractive.

But the question was: at what price?

In April, sources told Reuters that Verizon was opening the gambit with a roughly $100 billion proposal. In late July, McAdam was discussing the matter on the phone with Colao, who was calling in from Australia. Colao suggested they should meet face-to-face and then flew over to San Francisco two days later, as McAdam was there for a business trip.

"We got up early. We were both down at the gym together, we had a brief conversation on the exercise bicycle," McAdam said, adding they continued to talk over breakfast that morning.

"We looked at the final bit of data, and we said, 'Looks like $130 billion is about the right number and let's see if we can put a deal together around that.'"

They named the project, "River." Verizon was referred to as "Hudson," after the Hudson River that flows past Manhattan; Vodafone as "Thames" because of London's River Thames.   Continued...

A woman talks on her mobile phone as she walks past a Vodafone store in London September 2, 2013. REUTERS/Stefan Wermuth