Vodafone to retrain stake in its joint venture with Verizon

UK-based European mobile services provider and the world''s second-largest mobile phone company by customers, Vodafone, has opted to retain its 45-per cent stake, estimated at $45 billion, in Verizon Wireless, its US joint venture, with Verizon Communications.

Vodafone''s US operations contribute 20 per cent of Vodafone''s operating profits.

Vodafone had until today, 9 August, to exercise a put option to sell up to $10 billion worth of its stake in Verizon. Only last week it had said that it would sell shares worth up to $10 billion in the rapidly growing Verizon Communications.

After opting not to exercise its rights to sell part of its Verizon Wireless stake, Vodafone yesterday said, "Retaining its full 45 per cent interest is in the best interest of shareholders." It also said Verizon Wireless was a market-leading business with strong growth prospects.

Ever since it acquired Hutchison''s stake in Hutchison-Essar, Vodafone has been under pressure from some shareholders, particularly Efficient Capital Structures (ECS) that wants Vodafone to unlock value by spinning-off the Verizon stake into a separately listed firm saying the Verizon investment is not fully reflected in Vodafone''s share price.

The dissident shareholder also wants Vodafone to sell bonds and return cash to shareholders. The suggestions were shot down by an overwhelming majority of shareholders who see strong potential for Verizon over the longer term, and in July voted to retain the stake even though the debt-laden Verizon will not pay dividends till 2009.

They say any partial stake sale would trigger market expectations of a full sell-out, transfer control of the Verizon investment to independent investment banks and hamper Vodafone''s bargaining position for any later deal.