Vodafone gets unexpected cash boost from stake in joint US venture

Shares poised to rise in London

stock might perform better than F1 team did @ w/e

Vodafone shares are expected to get a fillip when trading opens early today (14th May 2013), after the surprise news from New York last night that it has been handed a £2.1 billion windfall from its stake in joint US venture Verizon Wireless (VZW). The news came too late to impact the British operator’s stock price in London where shares had closed around a half per cent down on the day, settling at 193 pence.

The dividend, payable on June 25, will make it the third year running that Vodafone has benefited from a payout from its venture with Verizon Communications.

The news was all the more surprising because it was only recently that Verizon CEO Lowell McAdam told JP Morgan analysts that it would be a “lean year” for payouts from the wireless subsidiary, if only because he wanted to reduce corporate debt instead.

Many industry watchers took that as a sign there would be no dividend, at the same time seeing it as further evidence of how Verizon was trying to pressure Vodafone out of its 45 per cent stake.

But another interpretation could be that now, by paying the dividend, Verizon has been able to boost its own coffers as it seeks to raise enough cash to wrest Vodafone’s share of the wireless business.

Since it was was formed in April 2000, VZW it has proved to be something of a cash cow, growing into the USA’s largest wireless carrier with around 99 million subscribers.

Verizon Communications, as the main parent, is desperate to gain full control and is thought to be putting together a $100 billion war chest to acquire Vodafone’s stake, though the UK carrier is believed to be demanding a third as much again.

In New York last night (13th May 2013), Verizon shares rose slightly in late trade to $53 after closing at $52.55.

Vodafone will announce next Tuesday (21st May 2013) what it intends to do with its latest cash boost when it also unveils its preliminary results, though news of the windfall alone is expected to lead to its stock rising when London trading resumes this morning.

FOOTNOTE: Contrary to expectations, Vodafone’s share price dipped slightly in London today, as the market interpreted the dividend as a possible sign that a major, buy-out deal was no longer imminent. Investors will also have to wait for a week before they know how much of the windfall, if any, will be passed on. Two years ago, Vodafone got a $4.5 billion (£2.8 billion) dividend from VZW (paid in Jan 2012), of which it paid £2 billion out as a special dividend.
With 48,847 million Vodafone shares outstanding, investors could be in line for a special bonus of 4.3 pence per share if all the VZW dividend were to be distributed.

About Dave Evans

Dave Evans was a long established commentator on both the IT and cellular industries. His last focus was on share price trends within the sector. He passed away in September [2014].
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