Vodafone is reportedly losing patience with its US partner Verizon over the lack of dividend payments from US-based mobile joint venture Verizon Wireless. According to The Observer newspaper, the two companies are now locked in talks over Verizon paying…
Vodafone is reportedly losing patience with its US partner Verizon over the lack of dividend payments from US-based mobile joint venture Verizon Wireless. According to The Observer newspaper, the two companies are now locked in talks over Verizon paying Vodafone a special dividend of up to US$4.6bn.
Verizon suspended dividend payments to Vodafone back in 2005 pointing to Verizon Wireless’s debt burden following the US$14bn acquisition of its US rival, Alltel, earlier in the year. That purchase catapulted Verizon Wireless into the number one spot for mobile operators in the US, overtaking AT&T.
However, many industry observers have argued that the suspension was more a move designed to force Vodafone to sell its 45% stake in the US mobile operator back to Verizon. Vodafone, though, has dug its heels in and has not been swayed by any offers to sell its stake, which has been valued the region of £33bn (US$51.3bn).
The Observer now claims that board members from both companies have been locked in secret talks about the dividend issue in New York, and that Verizon was on the verge of changing its no dividend policy and paying Vodafone up to US$4.6bn as a special dividend. Vodafone could then raise its own dividend payments from £7bn to £10bn (US$10.9bn to US$15.6bn).
However, a spokesperson for Vodafone told TelecomFinance that the story was pure speculation and although Vodafone and Verizon do talk regularly, the subject of dividends has not come up lately.
He said that Vodafone is always trying to extract value from all of its businesses, but understands that Verizon has to pay down the debt it has on its books before it can pay its investors dividends. Analysts say that the debt should be paid off by next year, at which time it will be able to resume paying dividends to Vodafone.
The Vodafone spokesman suggested that Verizon Wireless was generating good cashflow at the moment and soon would be in a stronger position to award dividend, having reduced its debt.
Verizon chose to decline to comment.
