Is Verizon Communications Inc. (VZ) Giving Vodafone Group Plc (ADR) (VOD) Something It Can’t Turn Down?

For the past 13 years, Verizon Communications Inc. (NYSE:VZ)‘ main squeeze has Vodafone Group Plc (ADR) (NASDAQ:VOD). The two paired up in April 2000 to found Verizon Wireless as a joint venture, which would proceed to become the largest wireless carrier in the U.S. with 98.9 million retail subscribers.

Verizon Communications Inc. (NYSE:VZ)’s 55% majority stake has always allowed it to call the shots, while Vodafone Group Plc (ADR) (NASDAQ:VOD) sits by passively with its 45% share. Speculation that Big Red is seeking to buy out that remaining 45% from Vodafone has increased in recent months, particularly as the wireless segment is where all of the growth is coming from nowadays. Vodafone CEO Vittorio Colao said he was “open” to the notion a couple months ago.

Talks are reportedly under way, but the two companies are still $30 billion apart. Verizon Communications Inc. (NYSE:VZ) doesn’t want to pay a penny more than $100 billion, while Vodafone Group Plc (ADR) (NASDAQ:VOD) thinks $130 billion is a fair asking price. However, Verizon has another trick up its sleeve.

Money talks
Verizon Communications Inc. (NYSE:VZ) CEO Lowell McAdam said last week that the wireless subsidiary may not pay out a distribution to its two owners this year, and instead may focus on paying down $5 billion in debt that’s coming due. Big Red then reiterated that it’s remaining firm on price when it comes to buying out Vodafone Group Plc (ADR) (NASDAQ:VOD)’s stake.

Combined, the statements are a clear message to the European telecom giant that Verizon Communications Inc. (NYSE:VZ) wants to put on financial pressure by withholding distributions. Verizon’s controlling interest allows it determine when distributions are made, while Vodafone Group Plc (ADR) (NASDAQ:VOD)’s noncontrolling stake allows it to do nothing but sit there and wait patiently.