Vodafone investors split on best use of Verizon windfall

Fri Aug 30, 2013 7:51am EDT
 
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By Sinead Cruise and Chris Vellacott

LONDON (Reuters) - Top investors in Vodafone Group VOD.L are set to clash over what the company should do with perhaps as much as $130 billion in proceeds from the sale of its stake in Verizon Wireless, which is expected to be announced imminently.

Vodafone shareholders contacted by Reuters as talks continued between the British firm and Verizon Communications VZ.N were split between those wanting to see the cash returned as dividends and those wanting the firm to invest it.

Verizon is close to buying the 45 percent stake in the joint venture Verizon Wireless from Vodafone, according to sources.

While some investors relish the idea of a special dividend and buyback spree, others say Vodafone is selling its best asset and must reinvest much of the proceeds in the company's future to avoid reliance on low-growth European markets.

Vodafone's 12-month dividend yield stands at 5.5 percent compared with an average of 5.1 percent for its European and UK peer group, according to Thomson Reuters data.

A lucrative sale of its Verizon stake would free up cash to invest in new infrastructure or to acquire smaller players to diversify and offset a squeeze on revenues in the mobile phone market, where competition is strong and prices are declining.

"You only want a deal done if they are going to do something with it," said a fund manager at one of Vodafone's 10 largest shareholders, who declined to be named.

"The worst-case scenario is that Vodafone takes the money and just hands it all back to shareholders. Then you are left with a weird company that isn't really doing anything."   Continued...

 
The Vodafone logo is seen at the counter of the shop as customers look at mobile phones in Prague February 7, 2012. REUTERS/David W Cerny