Vodafone to keep Verizon Wireless dividend

U.K. phone company Vodafone Group plc said Tuesday it will hang on to a $3.2 billion dividend from Verizon Wireless, highlighting its need to spend to boost services to existing customers.

Verizon Wireless, of Basking Ridge, N.J., is at the center of near-daily speculation about a potential $100 billion-plus buyout by majority owner Verizon Communications Inc. of its Newbury, England-based partner.

Vodafone on Tuesday was mum about rumored talks. "Verizon Wireless is a fantastic asset that generates a lot of cash," Vodafone CEO Vittorio Colao said, refusing to answer questions on a potential sale. "If there were anything to announce we would announce it."

Verizon, of New York, is reportedly prepared to pay $100 billion for Vodafone's 45% Verizon Wireless stake but the U.K. phone company wants closer to $110 billion. Analysts say the cash could be used to expand its existing services at a time when television, Internet and phone services have never been more related.

Publicly, both companies have denied a deal is imminent.

"Today's results underline the stalemate between Vodafone and Verizon with regards to Verizon Wireless, with both companies dependent on its free cash flow," wrote Sanford C. Bernstein & Co. LLC analyst Robin Bienenstock.

Tuesday's earnings highlight Vodafone's need to improve services.

Revenue in the fourth quarter ended March 31 slipped 4.1%, in line with a 4.2% decline in the entire fiscal year to £44.4 billion ($67.2 billion). However, operating profit rose 3.8% in the year to £11.96 billion.

The company blamed the falling sales on lower fees paid by other telecoms to rent its infrastructure. It also blamed economic woes in Italy and Spain, where it took write-downs of £7.7 billion.

"We have faced headwinds from a combination of continued tough economic conditions, particularly in Southern Europe, and an adverse European regulatory environment," Colao said.

Vodafone has already actively worked to boost what it offers to its customers around the world. Earlier this year it reportedly considered an offer for German cable company Kabel Deutschland Holding AG to expand in Europe's biggest economy.

Although it abandoned the approach after a leak pushed up the price of the target's shares, this month it signed an agreement to lease space on the high-speed cable network of Germany's Deutsche Telekom AG. The deal will help it offer even more customers high-speed Internet, cellphone, traditional phone and even TV services.

Vodafone also reportedly participated in an auction for the Yoigo Spanish unit of TeliaSonera AB before the Swedish seller called off the sale because of disappointing bids.

Vodafone's previous advisers have included Goldman Sachs Group Inc. and UBS.

If Vodafone landed with a windfall from a sale of the Verizon Wireless stake, it could find itself up against deep-pocketed competitors. John Malone's Liberty Global Inc. has already expanded in Germany, stepped into the U.K. through an acquisition of Virgin Media Inc. and secured a minority stake in Ziggo NV, a Belgian cable provider.

However, with $100 billion to play with, Vodafone could even consider buying Liberty Global, some analysts have suggested.

Vodafone shares by midafternoon in London Tuesday were little changed at 198.55 pence, translating into a market value of £96.8 billion. Englewood, Colo.-based Liberty Global's equity was worth $18.9 billion as of Tuesday morning.