Vodafone appears willing to keep its 45 percent stake in Verizon Wireless (NYSE:VZ) until Verizon pays down its debt and begins paying a dividend again, which is expected sometime in 2012. Vodafone executives sounded out their approach during the company's discussion of its half-year results.
The debate over the fate of Verizon Wireless has touched off numerous pronouncements from executives on both sides of the Atlantic this year. Verizon Communications owns a 55 percent stake in the nation's largest wireless carrier. Both Vodafone CEO Vittorio Colao and Verizon Communications CEO Ivan Seidenberg have said that a merger of the two companies does not make sense.
Verizon Wireless has not paid a dividend to Vodafone since 2005, and has instead focused on paying down debt. Verizon executives have hinted Verizon Wireless may begin paying a dividend again once its debt is paid down, which is expected at the end of next year.
Colao said Vodafone is exploring all options, but said the company's isn't looking to sell its Verizon Wireless stake. "The current outlook is that dividends coming from future cash generation is what we expect," Colao said. The dividend payments could bring Vodafone as much as $5.6 billion annually.
Vodafone CFO Andy Halford said that selling the stake, which is valued at $50 billion or more, would result in "a very large tax bill to pay," but dividends would be tax free.
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