) asserted a stable outlook for
Vodafone Group Plc.
) debt position and also maintained A3 ratings for its long-term
debt and P-2 for its short-term debt.
Despite facing strong macroeconomic pressures, regulatory issues
and intense competition from other carriers like
) across the European region, Vodafone remains successful in
maintaining such an outlook. This can be mainly attributed to
huge dividend payments of nearly $3.2 billion to be received from
Verizon Wireless by June end.
Moreover, Vodafone has a strong presence across the most emerging
and developed parts of the world. This has further helped Moody's
rating agency to retain faith over the company's growth prospect.
Verizon Wireless is a joint venture between
Verizon Communications Inc.
) and Vodafone, both holding a 55% and a 45% stake, respectively.
Verizon Wireless paid dividend of nearly $8 billion last year to
Vodafone in two tranches after it resumed its investor returns in
2011. Prior to this, Verizon had ceased paying dividends since
2005 as it utilized the surplus for lowering debt levels.
The dividend received from Verizon Wireless will not only boost
Vodafone's free cash flow and shareholders' returns but will also
help the company utilize the fund to deploy 4GLTE services across
According to Moody's rating agency, Vodafone's financial leverage
(gross debt/EBITDA) was 3.2x at the end of Mar 2013, with
adjusted retained cash flow (RCF)/net debt of 28%, which as per
the rating firm is quite fragile.
However, Vodafone's credit ratings can improve if the financial
leverage position falls below 2.0X and the RCF/net adjusted debt
ratio leaps above 35%. None of this is possible as the company
continues to get affected by the consistent fall in MTR rates
across the European region coupled with huge charges incurred by
the company in the Italian and Spanish operations.
Currently, Vodafone carries a Zacks Rank #3 (Hold).
MOODYS CORP (MCO): Free Stock Analysis Report
AT&T INC (T): Free Stock Analysis Report
TELEFONICA S.A. (TEF): Free Stock Analysis
VODAFONE GP PLC (VOD): Free Stock Analysis
VERIZON COMM (VZ): Free Stock Analysis Report
To read this article on Zacks.com click here.