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UPDATE 1-Verizon sees no need for mobile venture cash to fund dividend
May 14, 2013 / 7:20 PM / 4 years ago

UPDATE 1-Verizon sees no need for mobile venture cash to fund dividend

NEW YORK, May 14 (Reuters) - Verizon Communications Inc does not need more cash from its wireless venture with Vodafone Group Plc to support its own dividend payments, Verizon Chief Financial Officer Fran Shammo said on Tuesday.

Shammo also said future dividends from Verizon Wireless would be leaner than in the past. Verizon controls the venture’s dividend payments and analysts have speculated that it could use this control to pressure Vodafone into selling its Verizon Wireless stake. Verizon owns 55 percent of the wireless venture.

Shammo made the comments at a conference the day after Verizon Wireless, which is 45 percent owned by Vodafone, declared a $7 billion dividend. In comparison, Verizon Wireless paid its parents $18.5 billion in 2012, in two installments.

“If I needed the cash from wireless to pay a dividend I’d take the cash but I don’t see us needing the cash,” Shammo said.

Nomura analyst Michael McCormack said he does not think Verizon needs more cash to support its dividend this year. He estimated that Verizon’s annual dividend obligation is about $5.7 billion and that it has more than $6 billion in cash to support that this year.

Shammo’s comments came amid mounting speculation Verizon could buy Vodafone’s stake in the venture if they can agree on a price. Reuters, on April 24, cited sources as saying that Verizon was preparing a $100 billion bid for the stake, but investors have said they expect Vodafone to seek a higher price.

Shammo declined to comment on the potential for a Verizon purchase of Vodafone’s stake in Verizon Wireless.

Vodafone said on Tuesday that it would announce how it intends to use the dividend cash from Verizon Wireless when it reports its quarterly results on May 21. The UK company returned a large chunk of earlier payouts to shareholders, either via a special dividend or a share buyback.

Shammo also cautioned that Verizon Wireless would conserve cash to pay down debt and prepare for a spectrum auction, which could affect future dividends.

The venture will use cash to pay down $5 billion in debt due at the end of this year and early next year, Shammo said. It is also preparing to participate in a U.S. auction of wireless airwaves that could take place as soon as 2014.

Verizon shares were up 38 cents at $52.93 in afternoon trading on the New York Stock Exchange. Vodafone shares were unchanged at the close of trading in London on Tuesday.

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