By Sinead Carew
May 13 Verizon Wireless, the biggest U.S. mobile
service provider, said on Monday it would pay its parents
Verizon Communications and Vodafone Group Plc a
dividend of $7 billion in June, surprising some analysts who had
not expected a big payout.
The dividend comes amid mounting speculation Verizon could
buy Vodafone's stake in the venture if they can agree on a
price. Reuters reported on April 24 that Verizon was preparing a
$100 billion bid for the stake but investors have said they
expect Vodafone to seek a higher price.
The dividend decision follows recent comments from Verizon
Chief Executive Lowell McAdam to JP Morgan analysts that he did
not want to pay a premium for the stake and that the two owners
could face a "lean" year in terms of the Verizon Wireless
"I wouldn't call that lean," said Evercore analyst Jonathan
Schildkraut referring to the $7 billion dividend, which is
payable on June 25.
Verizon, which controls the wireless venture and dividend
decisions, declined to comment on the Verizon Wireless statement
on Monday. Vodafone had no immediate comment.
Schildkraut said he was surprised by the decision as he read
McAdam's previous comments as a sign that the executive wanted
to put pressure on Vodafone to agree to a deal. Schildkraut said
he does not think Verizon has an urgent need for cash.
"Despite more contentious commentary from Verizon management
its just does not appear that withholding Verizon Wireless cash
flow from Vodafone is likely to be part of the negotiation,"
The Verizon Wireless board decided on the dividend on May 9,
according a filing the company made with regulators.
The wireless venture's last dividend to its parents was a
$8.5 billion payout in the fourth quarter of 2012, which
followed with a $10 billion pay-out made in January of 2012.
Verizon had refused to sanction a dividend from the Wireless
asset between 2005 and 2011 because it said it preferred to pay
down debt and make acquisitions. At the time that was seen by
analysts as a move to pressure Vodafone out of the venture.
Based on Verizon's 55 percent ownership of the venture and
Vodafone's 45 percent stake, the June pay-out will bring Verizon
cash payments of $3.85 billion while Vodafone will receive $3.15
billion, according to the company.
Verizon shares rose slightly in late trade to $53 after
closing at $52.55 on the New York Stock Exchange.