Vodafone will report its annual results on Tuesday and speculation is brewing about what, if anything, CEO Vittorio Colao will say to shed light on the future of the operator's 45 percent stake in Verizon Wireless (NYSE:VZ).
Executives at Verizon Communications have said in recent weeks that they would still like to acquire Vodafone's stake, and Colao has in the past few months said he has an "open mind" about Vodafone's holding in the joint venture. Last week Verizon Wireless said it would pay will pay a $7 billion dividend to parent companies Verizon Communications and Vodafone by the end of June, diffusing a potential source of tension between the two parents. Verizon Communications, with its 55 percent stake, will get $3.85 billion and Vodafone will get $3.15 billion.
Reports from last month said Verizon would consider a $100 billion bid for Vodafone's stake, which Vodafone has reportedly dismissed as inadequate. Verizon and Vodafone have not commented on the reports.
An unnamed source familiar with a potential bid told Reuters: "All their eyes are on May 21 Vodafone earnings, and what Vodafone will say about Verizon Wireless."
Even a $100 billion payout would leave Vodafone with more cash than every other non-finance company except Apple (NASDAQ:AAPL), according to data compiled by Bloomberg. Analysts think Vodafone could use the cash to revive its weak business in Europe, refocus attention on the most important markets and make acquisitions.
"What they should do is a dramatic rethink of the business," Sanford C. Bernstein analyst Robin Bienenstock told Bloomberg. "You could pick which markets are vital to you. You could consider doing more stuff in other countries. It's clear that they need to act in a slightly more radical way."
Despite the expectation that Vodafone will report weak quarterly results, some analysts think Vodafone won't offer much guidance on a possible Verizon Wireless deal. "My expectation is that Vodafone will talk down any likelihood of a deal near term," Citigroup analyst Simon Weeden told the Financial Times. "They don't want to be pressured into a deal or raise false expectations."
Verizon has not commented much beyond discussing the newly announced dividend. Last week at an investor conference Verizon Communications CFO Fran Shammo said that Verizon Wireless would pay a dividend this year but that going forward the payment would be more "lean" than in the past because Verizon Wireless will be paying down $5 billion worth of debt that will mature later this year and into early next year. He also said Verizon Wireless will look to conserve cash ahead of the FCC's incentive auctions for broadcast TV spectrum, currently scheduled for sometime in 2014.
- see this Reuters article
- see this Bloomberg article
- see this FT article (sub. req.)
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