V is for Valuable. Vodafone's stake in Verizon Wireless, the largest mobile network in the United States, brought the British firm £5bn in two dividend payments last year. If it was put up for sale, it could generate £50bn.
Which is why Vodafone investors took heart on Tuesday when Lowell McAdam, chief executive of fixed line telecoms group Verizon Communications and the owner of the other 55% of Verizon Wireless, told the Wall Street Journal a deal to buy out the British company was "feasible". Vodafone's shares were lifted when McAdam said his company had long harboured an ambition to take full control and that it now had the financial muscle to do so.
Verizon Wireless may have reached a peak, making 2013 the year to sell. With Japanese telecoms group SoftBank buying US network Sprint while T-Mobile merges with MetroPCS, a price war is on the cards that could dent Verizon's profits.
However, Vodafone resisted selling in 2006 and chief executive Vittorio Colao says owning a share of the most successful American mobile network offers him "comfort" at a time when his European businesses are suffering.
Vodafone views Verizon as a core asset – it has sold minority stakes elsewhere. What would Colao spend his windfall on were he to exit America? Vodafone could invest in fibre as it has done in the UK with Cable & Wireless Worldwide, creating businesses that offer fixed line and mobile to rival France and Germany's former national telecoms groups.
The proposition sounds risky at a time when profits for these incumbents are deteriorating and Google and Apple are sucking up much of the new revenue. And a disposal would generate a giant capital gains tax bill, which may or may not be offset by years of accumulated losses at Cable & Wireless. Verizon may be of more value as a long-term hedge against the chill winds in Europe than as a one-off windfall.
