Verizon Wireless, the largest U.S. wireless carrier, approved a $10 billion distribution to owners Verizon Communications Inc. (VZ) and Vodafone Group Plc (VOD), the first payout of that kind in more than five years.
The payment will be made on Jan. 31 and distributed to the two companies in proportion to their ownership in Verizon Wireless, the company said yesterday in a statement. New York- based Verizon Communications holds 55 percent of the wireless venture, while Newbury, England-based Vodafone owns 45 percent.
Verizon Wireless will still have enough funds to buy assets, such as any divestitures that may be part of AT&T Inc. (T)’s acquisition of T-Mobile USA, said spokesman Peter Thonis. The T- Mobile deal, announced in March, would make AT&T the biggest U.S. carrier. Verizon Wireless generates more than $10 billion in cash annually, leaving it with money to make its own deals, Thonis said.
“It gives us the flexibility to meet cash needs in 2012,” he said.
Verizon Wireless had been focusing on paying down debt, rather than dividends to its owners. Verizon Chief Operating Officer Lowell McAdam said in January the wireless venture may pay a dividend to Vodafone and decide on the matter by the end of the year. In June, Vodafone Chief Financial Officer Andy Halford told reporters the company could get an annual dividend of as much as $5.5 billion for its stake in Verizon Wireless. Vodafone hadn’t received a dividend from the venture since 2005.
“We believe a distribution was widely expected, and do not believe the amount differs significantly from investor expectations,” Jason Armstrong, an analyst at Goldman, Sachs & Co., said in a note yesterday.
Vodafone could use the funds for acquisitions, Michael Mahoney, senior managing director at Falcon Point Capital LLC, said in an interview.
“They are always buying minority stakes, and there’s always the possibility of something larger,” Mahoney said. One option, which may be remote, is to buy Sprint Nextel Corp. (S), the U.S.’s third-largest wireless carrier, he said. Shares of the Overland Park, Kansas-based company plummeted yesterday after disappointing quarterly results.
Simon Gordon, a Vodafone spokesman, didn’t immediately return a request for comment.
Verizon fell 37 cents to $35.29 at 4 p.m. in New York Stock Exchange composite trading. Vodafone rose 4 percent to 172 pence in London.
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