Verizon, Vodafone reach $130 billion wireless deal
LONDON (CNNMoney) — Vodafone shareholders are set to receive a windfall worth tens of billions of pounds once the British telecommunications giant sells its stake in Verizon Wireless.
Vodafone said it expects to receive roughly $130 billion in cash and Verizon stock from the sale, and analysts believe a large chunk will be paid back to shareholders, which could give a boost to the U.K. economy and stock market.
While estimates vary, several market watchers expect upwards of $50 billion (£32 billion) will be returned to shareholders.
For an individual investor with £5,000 pounds in Vodafone shares, that could mean a special dividend payout worth £2,000, said Danny Cox, head of financial planning at U.K. stock broker Hargreaves Lansdown.
Vodafone is the second biggest company traded in London and is one of the most widely held companies in the U.K. According to latest company data, there are roughly 500,000 individual investors around the world who each own up to 5,000 shares in Vodafone, and more than 40% reside in the U.K.
Nearly 21% of Vodafone’s 48.5 billion ordinary shares are held as ADRs.
Rodney Hobson, a British investor and personal finance author who owns Vodafone shares, said he plans to reinvest any cash payouts back into the markets.
“Most people, like me, will reinvest the money,” he said. “I think this will underpin the U.K. stock market. I don’t think people will take the money and spend it — they may do, but I think they will reinvest it,” he said.
In addition to a special dividend payout, Vodafone is expected to use the proceeds from the Verizon Wireless sale to make further acquisitions and pay down debt. Many are hoping Vodafone will take a cautious approach to new purchases.
“I don’t want Vodafone just turning around and spending the money on any old acquisition. I’d prefer to get all the money myself if it can’t find any good deals,” said Hobson.
While a large cash payout may sound wonderful, economists say a special dividend won’t actually make Vodafone investors any richer as they’re trading ownership in a U.S.-based telecom company for hard cash.
But “they may feel wealthier,” said David Tinsley, a London-based economist at BNP Paribas. And if they feel wealthier, they might end up spending more.
“It could have an effect on their consumption behavior at the margin,” said Tinsley.
Any payout would have to wait until the deal closes, which is likely to be months away. Cox from Hargreaves Lansdown predicts the dividend could be paid in November, ahead of the Christmas season. By then, the U.K. recovery is predicted to be well underway.