Vodafone Shareholders May Reject Verizon Wireless Spinoff

LONDON (Dow Jones) -- Vodafone Group shareholders are likely to see off a call on Tuesday for the UK telecoms giant to split off its 45% stake in Verizon Wireless, the No. 1 mobile operator in the USA.

Although Vodafone's board has until now rejected a disposal, rebel shareholder Efficient Capital Structures (ECS) is urging investors to vote in favor of a spin-off at the company's general meeting in London.

ECS wants Vodafone to return 38 billion pounds ($78 billion) to investors and has called on Vodafone to sell the Verizon Wireless stake and lever up its balance sheet by issuing new bonds.

ECS has won support from leading fund managers including Jupiter, Invesco Perpetual, Calpers and Calyon, which collectively own about 10% of Vodafone Group shares, according to a report in the Sunday Times (of London). But the chairman of the group, Glenn Cooper, admitted in an interview the resolutions aren't likely to be approved.

"I would concede we are unlikely to get a majority for that resolution," he told the Financial Times in an interview published Tuesday.

The vote on the resolution is happening as a key deadline looms. Vodafone has until Aug. 9 to decide whether to exercise an option to sell up to $10 billion of its holding in its mobile-phone joint venture with Verizon Communications.

This is the fifth and final year that Vodafone has the chance to sell that portion of its minority holding. In the past it has opted against such a move.

In the last few months, however, pressure has been mounting for Verizon Communications and Vodafone to reach a solution on the company they created in 2000, when they pooled their U.S. mobile operations.

Verizon Communications, which faces increased competition from AT&T since its merger with Cingular, is eager to gain total control of Verizon Wireless, but it has so far failed to interest Vodafone in exiting the partnership.

Last week shares of Verizon Communications soared briefly following a report that Vodafone's board had contemplated making a $160 billion bid for the company as a way to take control of the joint venture.

Vodafone Chief Executive Arun Sarin later denied that the board had ever studied that option and Vodafone has no plans to make an offer for Verizon.

Vodafone shares are up roughly 13% since the beginning of the year, outperforming London's benchmark FTSE 100 share index.

On Tuesday Vodafone shares slipped 0.4%.

Fortis analysts on Monday said that while they expect Vodafone to beat off ECS's demands at the meeting, the questions are unlikely to go away.

It added that "the current situation highlights the dilemma in being a minority partner."

"It is simply not able to call the shots," the broker said of Vodafone.

CIBC World Markets analysts, meanwhile, noted that with the added support of major fund managers, it is "increasingly likely" that a change to the existing Verizon Wireless joint venture will occur within the next year.

It argued that while a spin-off of the stake is by far the most shareholder friendly option for both companies, a cash buyout by Verizon, in the $70 billion range, is the most likely outcome.

(END) Dow Jones Newswires "

Posted to the site on 24th July 2007