The waiting game pays off for Vodafone

The waiting game is finally over. Seven years after Vodafone last received a dividend from Verizon Wireless, the leading US mobile phone operator, the UK telecoms group will get a new pay-out in 2012. And it is not a small dividend.

Vodafone, which has a 45 per cent stake in Verizon Wireless, its joint venture with Verizon Communications, will get a $4.5 billion pay-out from the US mobile operator in January. Vodafone will respond by paying a £2 billion special dividend to its shareholders in February. The resumption of cash distributions by Verizon Wireless is a coup for Vittorio Colao, Vodafone’s chief executive, and Sir John Bond, the outgoing chairman. They faced down pressure from some shareholders for the UK group to sell its Verizon Wireless stake, instead insisting on playing a waiting game. Why were Mr Colao and Sir John so confident that their patience would be rewarded? And why did Verizon Wireless’ dividend payments stop in 2005? The answers can be found in how the balance of power inside Verizon Wireless has shifted over the years between its two shareholders. The joint venture’s parents have had a temptestuous relationship, but, for the moment at least, Vodafone has come out on top. The $4.5 billion payment by Verizon Wireless should increase Vodafone’s free cash flow by at least 30 per cent in 2011-12. The only real surprise in the announcement late on Thursday that Verizon Wireless would pay a $10 billion dividend to its parents in 2012 was the timing. Most investors were expecting a statement at the end of this year, rather than now