Vodafone Group

Verizon Wireless

Verizon Communications

Verizon Wireless finally confirmed it is to pay a dividend to its parents, with US$10 billion to be paid to its owners, Verizon Communications, and Vodafone Group, on 31 January 2012. The cash will be split in proportion to their ownership at that point, with Verizon currently owning 55 percent and Vodafone having the remaining 45 percent. Vodafone has already said it will use its US$4.5 billion (£2.8 billion) to make an additional dividend payment of £2 billion, with the balance used to reduce its debt. Vittorio Colao (pictured), chief executive of Vodafone, noted: “our long term partnership in Verizon’s strong and successful wireless business has seen the value of our investment increase significantly over recent years.” It has not been stated if the current payment marks the resumption of regular dividends, or is a one-off.

Despite being a profitable business, Verizon Wireless has not paid a dividend since 2005, at which time it was suggested that Verizon Communications was looking to make the business look less appealing to Vodafone, as the forerunner to an acquisition bid. In the meantime, the Wireless unit has used its cash to reduce its debt and for other corporate purposes, which Vodafone argued has increased the value of its stake in the company even if it has not been receiving dividends. The Wall Street Journal suggests that the decision to pay the cash now comes as Verizon Communications is facing a tougher time in its core fixed-line business. Verizon Communications is also undergoing a leadership transition, with former Verizon Wireless president and CEO Lowell McAdam set to become CEO of the parent in the near future. The dividend news, which came sooner than some telecom analysts had expected, was well received with Vodafone shares up 8 pence, or 5 percent, at 174 pence in a lower London market this morning.