Vodafone Group Plc
) in its press release stated that it would receive $3.2 billion
(£2.1 billion) in dividend payment from Verizon Wireless. Verizon
Wireless, which is a joint venture between
) and Vodafone, announced on May 13, that it has set aside $7
billion (£4.6 billion) for its stake owners. We believe the
dividend from Verizon Wireless would boost Vodafone's free cash
flow, and thereby increase returns to its shareholders.
Vodafone expects the dividend to be paid by June end. The
company, in its upcoming preliminary results announcement on May
2, would highlight plans to utilize the sum received.
Vodafone, the second largest carrier after
China Mobile Limited
), based on subscriber count, has significantly boosted it
liquidity profile by venturing into profitable businesses, while
divesting the less profitable ones. The company exited all
minority holdings except Verizon Wireless, which has bright
Over the last two years, Vodafone realized about £15 billion from
the sale of stakes in China Mobile, Softbank Corporation, SFR and
Polkomtel. This divestiture strategy was aimed to capitalize
prospects in the emerging markets. As a result, Vodafone expects
EBITDA margins to stabilize in fiscal 2014 with continued cost
efficiency, regional scale and improving margins in various
markets including India.
Vodafone is also among the top dividend payers and rewarded its
shareholders with regular dividends despite the ongoing economic
weakness in Europe. In Nov 2012, the company announced an interim
dividend of ???0.0327, up 7.2% year over year and consistent with
its growth target of 7.0% through Mar 2013. In 2012, the company
paid a dividend of ???2.440 per share, which was 10% higher than
the 2011 dividend payment.
However, recent rumors suggest that the Vodafone might have
to do away with its stakes in Verizon Wireless as Verizon
Communication is gearing up to beef up its ownership in its
wireless business. Verizon Wireless remains a lucrative source of
dividend paymen for Vodafone. Last year, Vodafone received
dividend of about $8 billion in two tranches after Verizon
Wireless resumed it investor returns in 2011. Prior to this,
Verizon ceased paying dividends since 2005 as it utilized the
surplus for lowering debt levels.
However, given the rate of dividend returns of Verizon Wireless,
it seems that losing stakes in Verizon Wireless would be
expensive for Vodafone, as it might affect its investors. As a
result, we believe that given the ongoing troubles with the
European business and the nascent stage of business in emerging
markets like India and Africa, the decision to part with its
position in America would be a crucial move .
Vodafone, which operates with the other European telecom players
), has a Zacks Rank #3 (Hold).
CHINA MOBLE-ADR (CHL): Free Stock Analysis
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VERIZON COMM (VZ): Free Stock Analysis Report
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