Sell stake or suffer seems to be message to UK partner
British mobile operator Vodafone’s shares looked set for another slide tomorrow [10th September 2012] following indications that its US partner Verizon Communications is keeping its hands in its pockets over calls for a dividend from the pair’s joint mobile venture. Verizon Wireless, America’s largest mobile phone company, is 45 per cent owned by Vodafone through a partnership with US broadband operator Verizon Communications. But there’s growing suspicion Verizon Communications wants to buy out Vodafone’s stake and is making life tough by resisting investor calls for a dividend from the venture to reflect its growing profitability.Such suspicions were reinforced on Friday when Verizon Communications agreed to pay a 3 per cent increase in its own dividend but made no mention of a dividend from the mobile venture, despite its importance to Vodafone which increasingly relies on it to compensate for slumping European sales.
It’s more than a decade since Vodafone started its mobile phone partnership with New York-based Verizon Communications, whose own faltering landline operations received a much needed tonic from the mobile venture.
In July [2012], Verizon Communications reported Q2 earnings up 13 per cent, largely driven by growth in the wireless venture and on Friday approved a dividend increase for the sixth consecutive year.
But while the news bolstered its own shares, the lack of any mention of a reciprocal payout for Verizon Wireless wiped value off Vodafone’s stock.
With Verizon Communications shares on the up and UK operator’s shares dipping, it could make it easier for the US broadband giant to buy Vodafone’s stake in the partnership – in turn explaining the US company’s unwillingness to sanction a dividend for the Verizon Wireless offshoot.
Complicating matters is that Vodafone may itself be open to the idea, having already sold most of its investments in wireless companies it doesn’t control including those in Asia and Poland and using the proceeds to support its own dividend and reduce debt.
But without clear signals either way Vodafone’s shares are suffering, slipping from a year high of nearly 192p to 177p at close of play on Friday.
It’s a fall that’s expected to continue today when trading opens in London, reflecting a downgrading of the stock by analysts at Bernstein who have given it a new target price of 170p, compared to 215p previously.
Since July [2012], Vodafone’s CEO Vittorio Colao and other key executives have shed millions worth of their own holdings, adding to speculation that the company’s fortunes are on the wane.
