All eyes on Vodafone's Colao for signs on Verizon

Fri May 17, 2013 4:25pm EDT
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By Kate Holton

LONDON (Reuters) - After months of speculation, Vodafone's (VOD.L: Quote) Vittorio Colao will be under pressure next week to set out whether he may sell its prized stake in Verizon Wireless in what would be one of the biggest deals ever.

Chief executive for five years, Colao has said only that he has an "open mind" on Vodafone's 45-percent stake in the U.S. operator, whose majority owner, Verizon Communications (VZ.N: Quote), is interested in buying out the British company's share.

With a possible asking price around $120 billion, the topic may well dominate Vodafone's annual results presentation on Tuesday, highlighting the pressures on profits elsewhere in the company and the dilemma faced by its Italian CEO.

A source familiar with the situation surrounding a possible bid for the stake by Verizon Communications said: "All their eyes are on May 21 Vodafone earnings, and what Vodafone will say about Verizon Wireless,"

Analysts are expecting Vodafone to post organic service revenue in the fourth quarter down 4.3 percent, the worst fall in its main sales measurement since the company started using that metric in 2003.

Analysts are also expecting the group to forecast a fall in free cash flow for the next financial year, to March 2014, due to increasing investment needs and the continuing torrid conditions in some of Vodafone's biggest European markets.

But the sharp fall in fourth quarter group organic service revenue, after a fall of 2.6 percent in the third quarter, is seen as the likely low point for the firm, due to a peak in regulatory cuts and the timing of a leap year last year.

"This free cash flow guidance is lower than prior guidance ... reflecting rising investment needs and greater macro pressures; however, this is already anticipated by consensus," Goldman Sachs said in a note to clients.   Continued...

Vodafone's new Chief Executive Vittorio Colao poses for photos after their company's annual general meeting in a conference centre in Westminster, London July 29, 2008. REUTERS/Andrew Winning