Vodafone Group Plc (VOD), the world’s largest mobile-phone company, said it could potentially get an annual dividend of as much as $5.5 billion from its 45 per cent stake in US venture Verizon Wireless.
The calculation is based on an assumed Verizon Wireless annual free cash flow of $10 billion to $12 billion, Vodafone Chief Financial Officer Andy Halford told reporters in New Delhi yesterday. No agreement has been reached yet, he said. Bob Varettoni, a Verizon spokesman, declined to comment.
Vodafone has retained its stake in Verizon Wireless, the largest US wireless provider, even after failing to receive a dividend from the company since 2005, while partner Verizon Communications Inc (VZ) focuses on paying down debt. Verizon said in January it may pay a “fair dividend” to Vodafone.
“We see the CFO’s comments on Verizon Wireless dividend as significant progress,” Royal Bank of Scotland analyst Lawrence Sugarman said on Thursday. “Halford’s comments mark the first time Vodafone has gone on the record as to what quantum of dividend it could expect.”
RBS on Thursday upgraded its recommendation for Vodafone shares to “Buy” from “Hold,” with a target price of 190 pence.
Vodafone dropped 0.2 per cent to 165.10 pence in London trading as of 9:43 am, valuing the Newbury, England-based company at 84 billion pounds ($134 billion). New York-based Verizon Communications rose 0.4 per cent to $36.72 in New York Stock Exchange yesterday.
“What we find interesting is whether Halford is just giving a theoretical number based on the free cash flow, or whether this is his expectation or understanding of what the actual dividend should be,” Sugarman said.
Verizon Wireless had $9.6 billion of net debt at the end of March, Halford said in May. The company is paying down about $1 billion each month, he said.