Verizon Wireless issues $10 billion dividend
29 July 2011 | Kavit Majithia
Telco giant Verizon Communications has announced its 55% owned mobile arm Verizon Wireless, which is partnered with UK-based Vodafone will pay out a dividend of $10 billion at the beginning of next year.
The payout comes six years after the previous dividend, and has been long-awaited for the companys shareholders. Vodafone has also made a concession, and will make a $3 billion issue to its shareholders next February.
When the last dividend was made, Verizon blocked Vodafone from making a similar payment and the move was seen by market watchers as a ploy to take Vodafone out of the joint venture. Verizon Communications did take a more direct approach for full ownership in 2006 and offered to buyout Vodafones 45% stake in Verizon Wireless, which was rejected. The Financial Times reports the rejection and subsequent dividend payments are vindication of the decision not to sell.
Approved by the mobile units board members, the agreement sees both Verizon and Vodafone will receive $5.5 billion and $4.5 billion respectively- boosting the UK groups cash flow by 40%. Vodafone said shareholders would receive $2 billion of this, with the rest going into reducing the companys net debt.
The FT also reports that Vodafone is urging Verizon Wireless to make this dividend payment an annual occurrence.