Vodafone Dumps SoftBank: Is Verizon Next?

By Richard Martin Comments
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Heeding restive shareholders and bolstering its balance sheet, U.K. carrier Vodafone said it has unloaded its investment in Japanese telecom investor SoftBank Corp. Now the big question: will it do the same with its stake in Verizon Wireless?

In the company’s second-quarter earnings call, Vodafone CEO Vittorio Colao said he has reached an agreement to sell off Vodafone’s $5 billion stake in SoftBank. That follows the sell-off of the carrier’s stake in China Mobile Ltd., and Colao said he will focus on deriving more revenue from its minority investments in Verizon Wireless and French operator SFR, by "generating liquidity or increased free cash flow," according to MarketWatch.

That led analysts to speculate that a sale of Vodafone’s 45 percent stake in Verizon Wireless, the No. 1 U.S. wireless carrier, could be imminent. Vodafone’s Verizon investment, which has not produced a dividend largely due to high levels of debt, could start to pay off handsomely in the next couple of years. Benefiting from subscriber growth and soaring demand for mobile data over smartphones, Verizon Wireless is now generating around $1 billion in cash monthly, and could produce some $5.6 billion in yearly dividends for minority investor Vodafone.

Vodafone has long been rumored to be seeking a way out of the Verizon deal, however (in which it’s a co-owner with parent company Verizon Communications), and large shareholders have demanded that the company exit such minority investments to focus on its core business.

Vodafone reported net profit of $12.1 billion on revenue of $36.3 billion for the six months ending Sept. 30, up almost 3 percent from the same period last year. The previously beleaguered Colao has seen his strategy shifts rewarded by investors, as Vodafone shares have risen 28 percent in 2010. The company also raised its outlook for the remainder of this year.

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