Verizon CFO Says He’s Growing Weary of Vodafone Questions
Verizon Communications Inc. (VZ) Chief Financial Officer Fran Shammo said he’s “tired of answering questions” about the company’s relationship with Vodafone Group Plc.
Analysts at a JPMorgan Chase & Co. conference raised the topic to Shammo today amid speculation that Verizon will seek to acquire Vodafone’s stake in their joint venture, Verizon Wireless. Shammo’s company began briefing analysts last month on how much it was be willing to pay for the 45 percent stake, people familiar with the matter said then.
Today, Shammo declined to offer his perspective, saying only that he was weary of the subject. Along with the announcement of a $7 billion dividend by Verizon Wireless yesterday, the CFO’s ambivalent response left New York-based Verizon’s strategy open to interpretation.
“This could have been an olive branch, and now they’ll take a softer approach to get them to the table,” said Kevin Smithen, an analyst at Macquarie Group Ltd. in New York.
Verizon has long said it is interested in gaining full ownership of the wireless business, which is the No. 1 mobile-phone company in the U.S. and more profitable than Verizon’s landline phone business.
Smithen, who has a neutral rating on Verizon, said he still believes a deal for Vodafone (VOD)’s stake will come in the next few months. “I wouldn’t read too much into any of it,” he said of Verizon’s latest actions.
Verizon will receive $3.85 billion from the dividend, while Newbury, England-based Vodafone will get $3.15 billion, according to a filing yesterday. The payout will be made June 25.
The dividend has been seen as a negotiating tactic for Verizon. Chief Executive Officer Lowell McAdam hinted in a recent meeting with analysts that Verizon Wireless might not pay the distribution this year, favoring debt repayment instead.
Getting the payment may remove some pressure for Vodafone to agree to a sale and may indicate Verizon has lost interest in acquiring the stake, Jonathan Chaplin, an analyst with New Street Research LLP in New York, said yesterday.
As the minority investor, Vodafone doesn’t control the venture and counts on its partner to set the dividend terms. The two companies routinely discuss the dividend policy at Verizon Wireless board meetings throughout the year.
Verizon has communicated with analysts that it believes the fair value of Vodafone’s stake is about $100 billion, people familiar with the matter said last month. Talks between executives of both companies over a deal have never amounted to much, in part because Vodafone doesn’t see the $100 billion offer as a reasonable opening bid, the people said.
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