Verizon Communications Inc. (VZ) Chief Executive Officer Lowell McAdam hinted in a meeting that Verizon Wireless, the company’s joint venture with Vodafone Group Plc (VOD), may not pay a distribution to its owners this year.
McAdam said the priority for Verizon Wireless’s cash flow will be to pay down the $5 billion in debt coming due between now and the middle of 2014 before paying dividends to the owners, according to a note yesterday by Philip Cusick, an analyst at JPMorgan Chase & Co. (JPM), which hosted the meeting earlier this week.
Verizon reiterated its desire to buy Vodafone’s 45 percent stake of Verizon Wireless and “expressed discipline on price,” Cusick said.
Verizon has communicated with some analysts that it believes the fair value for Vodafone’s 45 percent stake in Verizon Wireless is about $100 billion, people familiar with the matter said last month. Numerous private talks between executives of both companies about settling the stake sale never amounted to much, in part because Vodafone is dismissive of the $100 billion offer and doesn’t see it as a reasonable opening bid, the people said.
“Management believes that a premium would not be warranted for the minority stake given Verizon’s management control,” Cusick said in the note, referring to the fact that Vodafone hasn’t had a direct role in overseeing the venture.
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