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V'fone Investors Reject Efficient Demands

Vodafone Group plc (NYSE: VOD) received a welcome vote of confidence from its investors Tuesday as they voted overwhelmingly against motions put forward by activist investor Efficient Capital Structures. (See Vodafone Reports on AGM.)

Efficient, which has former Marconi boss John Mayo on its team, wanted Vodafone to sell or create a tracking stock for its 45 percent stake in Verizon Wireless , take on more debt so it can return cash to investors, and force it to seek special resolutions before engaging in major M&A activity. (See Vodafone: Time to Scold the Mayo?)

Not surprisingly, the Vodafone board rejected the proposals but was forced to put them to the vote at its Annual General Meeting (AGM), where the vast majority of investors, more than 93 percent, backed the board by voting against Efficient's motions. (See Vodafone Board: Hold the Mayo.)

That's by no means the end of the Vodafone/Verizon Wireless saga, which seems to have an endless number of new twists and turns. (See Verizon's Share Price Boomerang.)

Vodafone's CEO Arun Sarin stated during last week's earnings conference call that Verizon Wireless, in which Verizon Communications Inc. (NYSE: VZ) holds a majority 55 percent, is "a high performing business," and that he "continues to see a healthy future for the business."

However, he also stated that "portfolio optimization remains a central part of Vodafone's strategy," and that the board "continues its review of the group." He added that the Vodafone board has yet to decide on whether it will exercise its "put option" on Verizon Wireless, an option that would require Verizon Communications to buy a chunk of Vodafone's stake.

If Vodafone decides to exercise that option, its stake in Verizon Wireless would fall to around 38 percent, but it would pocket about $10 billion.

"That put option is open until August 9 -- the board will make its decision in the next few weeks," said Sarin. He added, though, that Vodafone has had the same option for the past five years but has "not taken it because we thought the value of the business would increase."

Vodafone's CFO, Andy Halford, also weighed in on the subject during the conference call, noting that Verizon Wireless is a "strong performer" that is likely to yield dividends in the next few years. "When the board thinks of Verizon, we consider which are the better alternatives, and we will continue to look at all the options. But the base case is that it's a very strong business." (See VZW Adds 1.3M in Q2.)

Halford added that the decision to hold on to the 45 percent holding over the years, and not exercise the put option, had been, in retrospect, "a very good decision."

— Ray Le Maistre, International News Editor, Light Reading

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