Verizon Wireless has declared an unexpected US$7bn dividend to its parents Verizon Communications and Vodafone.
Verizon will receive US$3.8bn while Vodafone will receive US$3.2bn, linked to their respective 55% and 45% stakes.
At the beginning of the…
Verizon Wireless has declared an unexpected US$7bn dividend to its parents Verizon Communications and Vodafone.
Verizon will receive US$3.8bn while Vodafone will receive US$3.2bn, linked to their respective 55% and 45% stakes.
At the beginning of the month JP Morgan analysts wrote, after speaking with Verizon’s management, that it was likely to be a “lean” year for Verizon Wireless dividends; as the majority shareholder Verizon has management control of the company.
“Given the speculation around Vodafone’s 45% stake in Verizon Wireless, we view this series of events as part of the negotiations,” Nomura analysts said in a memo today.
“By threatening to forego a distribution, then allowing it just 10 days later, we think Verizon is once again demonstrating their interest in pressuring Vodafone.”
While Verizon Wireless has issued a dividend, Bernstein analysts noted that it is less than previous distributions. “Vodafone will receive a payment that is 26% smaller than 2011’s and 13% smaller than 2012’s,” Bernstein said.
“For Vodafone this is a reminder that Verizon is a reluctant partner and will use its control to limit cash flow towards Vodafone as much as possible.”
New Street Research’s Jonathan Chaplin had a different take and suggested people were in danger of reading too much into the development: “While people are likely to speculate about what this means about the likelihood of a Vodafone-Verizon deal, we believe the key point is Verizon Wireless’ earnings power.”
