Would Vodafone Sell Its Verizon Wireless Share?

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Last week in Las Vegas, just before the start of the Consumer Electronics Show, Verizon (NYSE: VZ  ) CEO Lowell McAdam told The Wall Street Journal that buying out its longtime Verizon Wireless partner U.K.-based Vodafone (NASDAQ: VOD  ) would be attractive -- and doable.

"We have always said we would love to own all of that asset. ... I think [a deal] is feasible," McAdam told the Journal.

But such a buyout wouldn't come cheaply. Sanford C. Bernstein analyst Robin Bienenstock told Bloomberg that Vodafone's 45% share of Verizon Wireless could be valued at $107 billion. Verizon holds the remaining 55%.

As the largest mobile operator in the U.S., Verizon Wireless has been a strong profit source for both companies but a bit stingy in passing out that cash. According to Reuters, the companies have had their spats about dividend distributions.

But, in 2011, six years since the last dividend payout, Verizon Wireless passed out $10 billion to the principals -- $5.5 billion for Verizon, $4.5 billion for Vodafone. The companies have since announced that a further $8.5 billion would be divvied up by the end of 2012.

But would selling its share -- especially now -- be the right thing for Vodafone to do?

The company relies on its European operations for three-quarters of its revenues, but with much of the continent in austerity mode, more than half of Vodafone's adjusted operating profit for the first six months of its financial year came from Verizon Wireless.

However, last November, a day after Vodafone announced earnings results that showed how much the company relied on Verizon Wireless, Vodafone CEO Vittorio Colao said at an investment conference that selling its share in the venture could not be ruled out.

"Verizon Wireless is in the biggest, most attractive market in the world, and it's the leading company in terms of management, and it is still going very well," he told the conference. "Having said that ... the board formally twice a year, and perhaps even more, looks at the portfolio. We look at the pros and cons and we look at the situation and the board makes that decision."

A change of ... heart
Apparently, McAdam's remarks last Monday caused a bit too much buyout speculation, because the next day he told Reuters: "There's no discussions about it. ... It's been feasible for 10 years." He added: "There's nothing that's changed."

It is notable, though, that Verizon had once before attempted to buy out Vodafone's share. In 2006, Vodafone rejected Verizon's reported offer of $38 billion. The Vodafone CEO at the time, Arun Sarin, told Verizon that he was "extremely pleased" with their venture's growth. In other words, no thanks.

But that was then.

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