Shareholders in UK mobile telecoms giant Vodafone could be in line for a £3bn-plus dividend windfall thanks to the likely resumption of dividend payments from its 45 per cent stake in Verizon Wireless, the mobile arm of US telecoms group Verizon Communications.
Vittorio Colao, Vodafone’s chief executive, and Ivan Seidenberg, head of the US group, are thought to have resolved a five-year standoff sparked by Verizon’s 2005 attempt to force the UK group to sell its Verizon Wireless stake to the parent for an estimated £33bn. That plan failed because it would have made Vodafone liable for a potentially crushing £10bn capital gains tax bill. But analysts now believe that the stalemate is over and that Vodafone could start receiving dividends on its stake as early as 2012.
Vodafone investors have long viewed the group’s stack of minority stakes as an irritant, and have been piling on the pressure to force the group to act. Earlier this month, Vodafone sold its 3.2 per cent stake in China Mobile for a net £3.8bn (read our blog), a move seen by many market watchers as the first of many non-core assets sales. Besides its 45 per cent of Verizon Wireless, Vodafone also owns a 4.4 per cent stake in Indian Telco Bharti Airtel, 25 per cent of Poland’s Polkomtel and a 44 per cent stake in SFR, France’s number two telecoms group that is 56 per cent owned by Vivendi.
Evolution analyst, Steve Malcolm, believes Vodafone could raise between £8bn-£10bn from its smaller stakes, and a similar amount for its SFR shares, arguing that Vivendi “could easily pay £8bn-£9bn,” significantly above the current £6.5bn-£7bn market value of Vodafone's stake.
This could signal the potential for special dividends although Vodafone is believed to favour share buybacks. Some 70 per cent of the net proceeds (£2.7bn) from the China Mobile sale have been promised for buybacks, using the rest to repay some of its £33bn net debt.
