Verizon Wireless to pay $10B dividend to Vodafone, Verizon Communications

Verizon Wireless (NYSE:VZ) will pay a $10 billion dividend on Jan. 31, 2012, to its parent companies, Verizon Communications and Vodafone, ending a drama that had been a source of speculation between the two telecom giants.

Verizon Wireless--in which Verizon Communications owns 55 percent and Vodafone owns 45 percent--has not paid a dividend since 2005. The companies said Verizon Communications will get $5.5 billion and Vodafone will get $4.5 billion. Vodafone will pay a special distribution to its shareholders of about $3.27 billion next February. 

The dividend means that Verizon and Vodafone will have one less thing to worry about as they work to marry their international enterprise businesses and other services. 

One big winner in the aftermath of the announcement is Vodafone CEO Vittorio Colao, who stuck with the partnership and remained patient over the dividend payout. Analysts said the timing of the announcement reflects the fact that Verizon Wireless is almost done paying down its debt, and also that Verizon's wireline business does not generate enough cash to cover the company's dividend.

Verizon said the dividend payout will give it sufficient cash flexibility for 2012. However, Verizon has not decided whether Verizon Wireless will make dividend distributions on an annual basis. The Verizon Wireless board will make a decision on further payments in the second half of 2012, a Verizon spokesman told the Wall Street Journal.

Verizon did not disclose the wireless venture's cash holdings or cash flow. Verizon as a whole reported $6.2 billion in cash on hand at the end of June and had $33.4 billion in cash flow from operations in 2010.

For more:
- see this WSJ article (sub. req.)
- see this Bloomberg article
- see this NYT article
- see this FT article

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