Verizon Communications (NYSE:VZ) CEO Lowell McAdam hinted that Verizon Wireless will not pay a dividend to its owners this year and will instead focus on paying off debt coming due, according to a financial analyst who had a meeting this week with McAdam.
According to a research note from J.P. Morgan analyst Phil Cusick, which found its way to several media outlets, McAdam said the focus for Verizon Wireless will be to pay down the $5 billion in debt it has coming due between now and the middle of 2014 before making another dividend payment.
According to the Wall Street Journal, the comments appear to be aimed at pressuring Vodafone to sell its 45 percent stake in Verizon Wireless. Reuters and Bloomberg reported last month that Verizon hired advisers in advance of a possible $100 billion cash and stock bid for Vodafone's stake, kickstarting another round of speculation about how and when the two companies will resolve the nature of their relationship. McAdam said the parent companies could face a "lean" year in terms of receiving a dividend payment, according to Reuters.,
Verizon Wireless paid an $8.5 billion dividend to its parent companies late last year, split along the lines of their stakes in the company. The payment was less than the $10 billion payment Verizon Wireless distributed in January 2012, which was the first time the carrier had paid out a dividend since 2005.
The reports also indicated that McAdam said he did not believe a premium would be required to buy Vodafone's stake. Bloomberg reported that, according to Cusick, McAdam reiterated Verizon's desire to buy Vodafone's stake in Verizon Wireless and "expressed discipline on price."
Verizon spokesman Peter Thonis told FierceWireless that the "J.P. Morgan report is essentially accurate." Thonis declined to comment beyond that.
According to Reuters, Vodafone investors want more than $100 billion and are pushing for a deal valued between $120 billion and $135 billion. Citing "six major Vodafone investors," mostly unnamed, Reuters recently reported that they would prefer a full merger with Verizon instead of the $100 billion offer.
Regarding a deal with Verizon over Verizon Wireless, Vodafone CEO Vittorio Colao recently told the Journal, "We have our mind open on everything."
- see this WSJ article (sub. req.)
- see this Reuters article
- see this Bloomberg article
- see this separate Bloomberg article
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