Vodafone announced a restructuring plan on Thursday that will group its minority holdings into a single, but separately managed unit. This new unit will include the carrier’s minority stakes in Verizon Wireless, SFR, Polkomtel and Bharti; when combined, these holdings are worth an estimated $65 billion. With its stock prices stagnating, Vodafone is under increasing pressure to liberate these holdings and recoup this cash both for its stockholders and for re-investment back into the company.
Vodafone Chief Executive Vittorio Colao has indicated that he is not interested in managing minority stakes and investors are in agreement. Analysts note that this organizational shake-up paves the way for the wireless company to closely watch these holdings and easily offload them when the time and the price is right.
Vodafone has already made a small step in this direction when it confirmed earlier this week that it sold its 3.2% stake in China Mobile for £4.3 billion ($6.65 billion). While that sale proceeded quickly and easily, Vodafone’s other assets, particularly Verizon Wireless, are not so easy to offload. Vodafone owns a 45% stake in Verizon Wireless, the largest wireless carrier in the US and has not received a dividend from that venture since 2005. An unfortunate situation that has lead to grumbling among its stockholders.
The only prospective buyer for this minority stake is Verizon Wireless and it is unknown if the US operator is even interested or can afford such a deal at this time. Earlier, Verizon hinted at buying back its shares from Vodafone but did so without mentioning a timetable for this transaction. If Vodafone is unable to negotiate a workable and timely deal with Verizon, all is not lost. Vodafone can also seek a merger with Verizon or simply hold onto these stakes until 2012 when dividends should begin again.
Regardless of what happens, it will be interesting, from a financial perspective, to see what Vodafone does and how its business decisions may change the wireless landscape, both here in the US and overseas.