LONDON — Verizon Communications Inc. (NYSE:VZ) has begun to play hardball in its tete-a-tete with Vodafone Group Plc (LON:VOD) over the possible buyout of the British-based telecoms company’s 45% interest in their joint venture, by declaring that Verizon Wireless is not guaranteed to pay a dividend this year.
In a move that’s widely recognized as an attempt to force Vodafone Group Plc (LON:VOD)’s hand into selling its stake, Verizon Communications Inc. (NYSE:VZ) CEO Lowell McAdam instead said that the top priority for Wireless is to pay down debt to the tune of $5 billion that’s due between now and mid-2014, suggesting that paying a dividend to its owners from its sizable cash flow may play second fiddle.
While reaffirming their preference to buy out Vodafone Group Plc (LON:VOD)’s interest, Verizon Communications Inc. (NYSE:VZ) also stated that it will not be bullied into paying over the odds after expressing “discipline on price,” according to Philip Cusack, an analyst at JPMorgan Chase & Co. (NYSE:JPM), which hosted a meeting with Verizon Communications Inc. (NYSE:VZ) earlier this week. Cusack continued: “Management believes that a premium would not be warranted for the minority stake given Verizon Communications Inc. (NYSE:VZ)’s management control,” further outlining the U.S. company’s tough stance.
This comes after six major shareholders in Vodafone Group Plc (LON:VOD) declared that Verizon Communications Inc. (NYSE:VZ) would need to stump up more than the widely reported $100 billion figure to buy out its stake in Wireless, citing an estimate closer to $120 billion.
Investors are keeping a close eye on proceedings, as the share price continues to hover around a 10-year high with the knowledge that any surplus cash from a buyout could make its way back to shareholders.
However, some Fools are wary of a Vodafone Group Plc (LON:VOD) without its prime asset, with kiffberet commenting: “I’d probably sell up just after the deal is announced… Bought at 159 pence and 167 pence six months ago, so it’s all good profit to me… (and I don’t trust managment to spend their windfall well)” and ANuvver stating: “[I’ve] said it before, and I’ll say it again: VOD without its Wireless stake is not worth holding.”
Does anyone have a different opinion, should the deal go through? Or do you agree with these two Fools? Either way, feel free to enter your comments in the box below!
Sam Robson owns shares of Vodafone. The Motley Fool recommends Vodafone.
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