Vodafone says no to $20bn payday

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The Independent Online

Vodafone has ruled out cashing in its $20bn (£12.2bn) stake in Verizon Wireless, despite pressure from the City to pull out of the mobile market in the United States.

The British mobile phone giant has the opportunity to sell its 45 per cent stake - known as a put option - to its American partner, Verizon Communications, in two tranches starting this summer.

But it is understood that chief executive Sir Christopher Gent will on Tuesday insist that the US still remains part of Vodafone's strategy.

Sir Christopher will present Vodafone's annual results for the last time before he hands over to incoming chief executive Arun Sarin on 31 July.

The pair believe that it is better to have a minority stake in America's No 1 mobile operator than take a controlling stake in smaller player.

It is understood Vodafone has ruled out exercising put options and using the cash to bid for Voicestream (the US mobile arm of Deutsche Telekom), or AT&T Wireless.

Vodafone is expected to deliver an impressive set of figures next week. Investment bank Nomura predicts a net profit of £9.36bn.

Nevertheless, many analysts believe that Vodafone would deliver greater shareholder value by selling Verizon Wireless.

Mark James, telecoms analyst at Nomura, said: "The US market remains the weakest part of Vodafone's operations. [Verizon Wireless's] business model, centred on all-you-can-eat call plans, is driving capital expenditure up and tariffs down. It's hard to see what Vodafone can do to reverse this trend."

He said that Vodafone would deliver greater value by exercising the put options and returning cash to shareholders through dividends or by purchasing its own shares.

John Karidis, telecoms analyst at Commerzbank, added: "We believe the 45 per cent stake in Verizon Wireless is not much more than a good investment in a leading [operator]. We see little scope for ... synergies with the rest of Vodafone."