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Vodafone's Verizon dilemma

Monday, May 20, 2013 - 02:04

May.21 - Vodafone's posted the largest ever fall in its main revenue measure, forcing it to keep a dividend from Verizon, its healthy U.S. arm, to compensate for a slump in southern Europe. Ciara Sutton asks whether the results will dampen or fuel speculation Vodafone will sell its stake in Verizon in one of the world's largest deals.

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It's their worst sales results in 8 years and the largest ever fall in main revenue - Vodafone is not having the best of times. Tough conditions in Europe have hit the world's second largest mobile operator, forcing it to keep a dividend from its healthy U.S. arm to compensate for the slump. The one shining light in Vodafone's results is Verizon Wireless - which Vodafone owns nearly half of. The US operator's rapid growth has offset some of Vodafone's weakness and helped it report slightly better than expected profit and earnings per share. But there's speculation Vodafone may sell its stake in Verizon Wireless for around 120 billion dollars - it would be one of the world's largest deals. Verizon Communications is keen to buy and has been ramping up pressure in recent months. Vodafone's saying little but Ovum's Omeka Obiodu says it makes sense for them to hold on to the unit until Europe is back on track. (SOUNDBITE) (English) EMEKA OBIODU, PRINCIPAL ANALYST: INDUSTRY, COMMUNICATION & BROADBAND, OVUM, SAYING: "Will the markets allow it? Will the shareholders give it the benefit of the doubt? I don't know. But make no mistake about it, it is in Vodafone's best interest to hold on to that asset for as long as it can, until it nurses European operations back to health." Having completed a three year dividend programme that guaranteed 7 percent growth per year, Vodafone says it's now happy to simply maintain current levels. (SOUNDBITE) (English) EMEKA OBIODU, PRINCIPAL ANALYST: INDUSTRY, COMMUNICATION & BROADBAND, OVUM, SAYING: "It's just unfortunate that the Verizon Wireless story continues to reverberate. In my suspicions, it's distracting management a bit from focussing on sorting out the problems in Europe." Vodafone's steepest falls were in southern Europe, with operators cutting prices to win business from struggling consumers. In Italy and Spain service revenue fell by around 12 percent leading to an 8 billion pound writedown. The results do nothing to end Vodafone's Verizon dilemma - the "will they-won't they" saga is likely to continue for a while longer.

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Vodafone's Verizon dilemma

Monday, May 20, 2013 - 02:04