Verizon Chooses Not to Be Stingy


As part of its efforts to coax Vodafone into selling its stake, Verizon had been reportedly looking to pinch the European company by having its Verizon Wireless subsidiary not pay out a dividend to its two joint owners. Instead, the top domestic wireless carrier could have devoted those dollars to paying down debt.

Well, Big Red has had a change of heart, and has gone ahead and decided to give some back to its parents. Verizon Wireless will pay out a total $7 billion distribution in June to Verizon and Vodafone commensurate with their respective 55% and 45% stakes. That puts Verizon's share at $3.85 billion, and Vodafone will get $3.15 billion.

If Verizon had chosen to have the wireless segment hang on to those funds, it would have also been depriving itself of money it could use toward paying out dividends to its own shareholders.

It's unclear whether or not the decision had any relation to ongoing talks of Verizon buying out Vodafone's portion. Last time investors heard, the pair were still about $30 billion apart on price.

Verizon Wireless continues to be the strongest carrier. At a J.P. Morgan tech conference today, CFO Fran Shammo said that a third of postpaid subscribers were already on Share Everything plans, less than a year after the shared data plans were launched.

That's in part because Big Red is much more aggressive with nudging customers toward them, in that it simply offers no other choice for new subscribers. New customers have to sign up for shared plans, while main rival AT&T at least still offers a choice for new subscribers. Both Verizon and AT&T have previously expressed that share data plans will translate into revenue upside.

Shammo also addressed the assumption that Verizon was looking to squeeze Vodafone, noting that CEO Lowell McAdam's previous comments were misinterpreted. McAdam only meant that Verizon Wireless would pay out less going forward in order to focus on debt repayment. So much for being stingy.

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Fool contributor Evan Niu, CFA, owns shares of Verizon Communications. The Motley Fool recommends Vodafone. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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