Vodafone chief Colao says happy with Verizon stake
LONDON (Reuters) - Vodafone boss Vittorio Colao staked his reputation on selling the group's prized stake in U.S. operator Verizon Wireless at the right time and right price, saying on Tuesday he would not bow to pressure to do any deal.
Contemplating what could be the world's third-largest ever corporate deal, Colao and his number two Andy Halford said they were happy holders of the 45 percent stake, following increasing demands from majority owner Verizon Communications Inc for a sale.
That would only change, they said, when they received an offer which was preferable to the existing structure, in terms of dividends received and tax paid.
Verizon is working on a $100 billion offer, seen as an opening gambit by investors, two people close to the situation have told Reuters - a deal which would rank behind only Vodafone's purchase of Mannesmann and Time Warner's AOL buy.
"I'm paid to have a weight on my shoulders," the Italian chief executive said after publishing full-year results that showed the scale of the pressures on the rest of the company.
"We are in a very comfortable situation, we have an ownership of an asset that delivers a pretty important amount of value to our shareholders, which also has liquidity, and is in a country which has a fantastic market structure, with a company that is the leader."
"It is a pretty good position to be in," Colao told reporters. "(But) if an offer comes that is more advantageous than the current situation, then of course we will look at it."
Colao, a 51-year-old former partner at consultancy McKinsey who has won plaudits from investors for selling assets at the right time in his almost five years as CEO, noted he had a good record when it came to selling out of different countries.
"So far I think the decisions have been pretty good," he said. Shares in Vodafone are up 28 percent since the start of the year to highs not seen since the dot-com boom in 2001, on speculation that a deal could be close.
Formed by the two parents in 2000, Verizon Wireless has become the most important asset in Vodafone's portfolio, providing rapid growth in both subscribers and profits at a time when the rest of the British company is contracting.
Vodafone's results highlighted the challenges facing Colao, including the biggest-ever drop in one measure of the revenue it gets from customers. That forced the group to reinvest its latest dividend from the United States into its struggling European assets, rather than return it to shareholders.
The steepest falls came from southern Europe, with service revenue down 12.8 percent in Italy and down 11.5 percent in Spain. The group also took a 1.8 billion pounds impairment charge on its business in Italy, taking total writedowns for Spain and Italy for the year to 7.7 billion pounds.
Vodafone is the second-largest mobile operator in both those markets, but has lost share to cheaper rivals as cash-strapped customers switch to low-cost options or ditch their phones.
Overall, the contribution from Verizon and cost cuts elsewhere helped Vodafone, the world's second-largest mobile operator with 403 million subscribers, to post profits slightly ahead of forecasts. Core earnings of 13.3 billion pounds compared with a forecast 13.2 billion.
Having completed a three-year dividend program that guaranteed an attractive 7 percent growth per year, Vodafone scaled back its ambitions, pledging instead to maintain the dividends at least at current levels.
"We continue to face stiff headwinds from regulation, competition and the tough economic environment, particularly in Europe," Colao said.
Management at Verizon Wireless has implied that the two parents could also face a lean year in terms of dividends, but Colao and Halford said they were happy with their lot.
"If $7 billion is paid out in a lean period, then we're ok with lean periods," Halford said, referring to the sum announced last week to both parents. "It is a great business with good momentum."
Analysts had said a possible $20 billion tax bill could prevent a deal, but the people familiar with a possible buyout said it could be structured to keep the bill nearer $5 billion. Asked for his reaction, Colao said he could not comment until he saw firm details.
"There are so many different possibilities in terms of transactions and so many jurisdictions involved ... it is difficult to give an answer," he said. "(But) it's a very disciplined board, it's a very disciplined management and we have no emotional attachment to anything."