Having faced sustained criticism for not selling its 45 per cent holding in Verizon Wireless, Vodafone CEO Vittorio Colao said the company will pay a special dividend of £2 billion, or 4 pence a share, in February after receiving its first dividend payment from the US operator since 2005.
"The dividend from Verizon Wireless allows us not only to reward our own shareholders with an immediate and sizeable cash return, but also to continue to reinvest in our business," said Colao in a statement.
This move follows an announcement from Verizon Wireless that it will distribute $10 billion on Jan. 31, 2012, to its two owners, Vodafone and Verizon Communications, bringing an end to years of simmering conflict between the two telecom giants. Verizon Communications owns 55 per cent of Verizon Wireless and Vodafone owns 45 per cent. The companies said Verizon Communications will get $5.5 billion and Vodafone will get $4.5 billion.
While there has been growing speculation that a payment was imminent, the decision to move ahead is one of the first from the newly appointed Verizon Communications CEO, Lowell McAdam. Vodafone's Colao is believed to have built a close working relationship with McAdam, having struggled to form relations with Verizon Communications' outgoing CEO, Ivan Seidenberg.
Commenting on the payout, Deutsche Bank analyst Robert Grindle said in a note carried by the Wall Street Journal: "Whilst a one-off rather than recurring dividend, this action bodes well for future cash returns to Vodafone and should partly eliminate the U.S. asset discount implicit in Vodafone's share price."
Informa Telecoms & Media analyst Thomas Wehmeier, said that Colao's waiting game is a strong example of strategic execution in the face of widespread market scepticism. "Vodafone has shown it is playing--and winning--the long game and is now justifiably reaping the benefits," Wehmeier wrote in a blog post. "But the billions that Vodafone will be paid in dividends pale in comparison to the tens of billions that have been added to the value of Vodafone's 45 per cent stake in Verizon Wireless during the [former Vodafone Chairman Sir John] Bond and Colao reign at the top."
Vodafone CFO: Verizon could potentially pay out $5.5B dividend
Vodafone boosted by cutbacks and Verizon Wireless dividend prospects
Vodafone brings in a new chairman experienced in restructuring
Vodafone divestitures, including Verizon Wireless, should be pursued at sensible prices
Rumour Mill: Will Vodafone, O2 bid for C&W Worldwide?