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Vodafone to reap the harvest worth $4.5 billion from investment in Verizon Wireless (US)

Vodafone is poised to receive its first dividend payment from its Verizon Wireless subsidiary in some years. A $10 billion worth of dividend payment to its shareholders, has been given the green signal by the US network.

Vodafone holds 45% stake in Verizon Wireless, that entitles the former to receive $4.5 billion dividend payment; to be dished out by the latter on 31 January, 2012.

On the other hand, Vodafone shareholders stand to receive a special dividend worth $3.28 billion in February 2012, as announced by the company while the remainder will be put to good use in reducing the company’s net debt.

Verizon Wireless announcing the dividend payment augurs well for Vodafone that had instituted Verizon Wireless, eventually to be pressurized to let go of its stake and return the cash to the shareholders in the last few years.

In January 1999, Vodafone and Bell Atlantic were competing to acquire Airtouch Communications, the CDMA network based in the USA; the former emerging victorious. Bell Atlantic then terminated its PrimeCo joint venture with Airtouch, in the wake of failing to buy the company. This move fragmented the network with Bell Atlantic retaining control over the Eastern network of the USA while the Airtouch, Western side. Nevertheless, the founding CEO of Vodafone Chris Gent was negotiating with Bell Atlantic with the aim to establishing a CDMA network operating across the country. Eventually, the institution of Verizon Wireless was announced by the two companies, in late September.

Vodafone ended up with 45% stake in the joint venture while Bell Atlantic, 55% controlling stake; the mobile network being renamed Verizon Communications at a later stage.

In reality, Bell Atlantic had held 24.2% and 30.8% in Verizon Communications through its subsidiaries Bell Atlantic Mobile Systems and GTE Wireless respectively while Vodafone 6.2% and 38.8% through PCS Nucleus and JV PartnerCo respectively.

Amidst all these business dealings, the companies had not always shared cordial relations. In addition, Verizon Communications had looked to buy out Vodafone’s stake in the joint venture, in the meantime with Vodafone also, considering an acquisition of Verizon Communications itself.

Vodafone’s endeavor to acquire AT&T Wireless in 2004 that did not go as planned, had added fuel to the fire and further strained the company’s partnership with Bell Atlantic. Eventually, payment of dividends to Vodafone was stalled for a longer period as debt was again raised, and then paid down.

It has been more than a decade since Vodafone began to reap the benefits from all its work hard.

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