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Three-way calling is still awkward. Yet Verizon Communications, Vodafone and AT&T are (reportedly) trying anyway. Rumours suggest that AT&T has picked up the phone to jointly bid with Verizon Communications for all of Vodafone – with Verizon taking Vodafone's stake in Verizon Wireless and AT&T getting Vodafone's European wireless assets. But the two Vs don't require a third voice to sort out custody of Verizon Wireless. Their best option remains a standard stock merger of equals.

Verizon Wireless is a colossus. Its $30-billion (U.S.) of earnings before interest, taxes, depreciation and amortization towers over the $19-billion that Vodafone's other businesses generate. Verizon Communications owns 55 per cent of it, and thus has managing control and makes decisions about cash distributions ($18.5-billion has been sent back to the parents in the past two years).

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With the rest of Vodafone struggling in its core markets, its valuation has been propped up by its slice of Verizon Wireless. Vodafone's market cap is around $140-billion, but its pretax stake in Verizon Wireless could be $120-billion. But finding $120-billion in cash presents an insurmountable challenge for Verizon (the largest all-cash deal was InBev's $50-billion takeover of Anheuser-Busch).

Bringing AT&T into the fold doesn't solve this riddle. The two U.S. companies together would have to pay a whopping $190-billion in cash (Vodafone's market value at a 40-per-cent premium), as a joint share deal is not practical.

Moreover, such a deal would help Verizon's arch-rival achieve one of its stated goals: expanding its European wireless business. AT&T sees Europe as a fragmented market crying out for a consolidator that can afford to invest in a cutting-edge network.

A stock merger between Verizon and Vodafone is not a cinch. A CEO has to be picked and a strategy adopted, to say nothing of the integration mess. But it is time to get real about what options Verizon Wireless actually has.

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