A Securities and Exchange Commission (SEC) filing by Verizon Communications Inc. (NYSE: VZ) yesterday could be a sign that the company is preparing to buy back a portion of Verizon Wireless from Vodafone Group plc (NYSE: VOD).

Verizon's S-3 form says the company plans to sell $8 billion worth of a $10 billion shelf offering from 2003. A shelf offering is a registration of an equity or debt that is prepared in advance of actually selling the securities. It's designed to let the company quickly issue the offerings, in the event that capital needs to be raised.

So why is Verizon abruptly raising $8 billion?

According to one Wall Street analyst, it could be in preparation to buy back a $10 billion stake in Verizon Wireless from Vodafone. Vodafone holds a $10 billion put option on Verizon Wireless that is due to expire in the 30 days before or after July 10, 2007.

"We believe it probably makes sense for both parties to exercise the option, as it would take off some shareowner pressure on both sides," writes CIBC World Markets analyst Timothy Horan. The exercising of this option would reduce Vodafone's stake in Verizon wireless to 38 percent from 45 percent and would probably be valued at 8 times earnings before interest, taxes, depreciation, and amortization (EBITDA), according to Horan.

Vodafone had been under pressure to return capital to shareholders by selling the Verizon Wireless stake. Last week, Vodafone's board rejected a proposal along those lines from activist investment firm ECS. (See Vodafone: Time to Scold the Mayo? and Vodafone Board: Hold the Mayo.)

This hasn't been Vodafone's first chance to sell off part of its Verizon Wireless stake. "It has always been part of the agreement that they could do this every summer," a Verizon spokesman says. Verizon would not comment on the likelihood of Vodafone actually exercising its option this time around.

— Raymond McConville, Reporter, Light Reading