The long-running efforts of UK-based Vodafone Group to extract a shareholder dividend from its stake in US operator Verizon Wireless is reportedly drawing to a conclusion with the UK group confident of a positive outcome. According to a Financial Times report, which cites people familiar with the UK-headquartered company, Vodafone has assumed an increasingly strong negotiating position on Verizon Wireless due to the mobile unit’s increasing importance to Verizon Communications, its majority parent. Vodafone has been mulling three options on Verizon Wireless: securing a resumption of dividend payments – something that has not happened since 2005 – selling its stake in the business, or merging with Verizon Communications. Analysts see a return to shareholder payouts as the most likely outcome due to the tax liabilities and costs of a merger or a sale. However, sources say that no firm plan has been finalised.

Verizon Communications owns 55 percent of Verizon Wireless and has blocked Vodafone – owner of the remaining 45 percent – from making dividend payments since 2005 in order to pay down debt. Like his predecessor Arun Sarin, Vodafone CEO Vittorio Colao has faced pressure from investors to break the impasse. However, a solution now appears imminent as Verizon Wireless is expected to be debt-free by the end of next year and is outperforming Verizon’s other business units. Verizon Communications paid a dividend worth US$5.3 billion in 2009 and Bernstein analysts said problems at the US group’s fixed-line business meant that it would need to start tapping Verizon Wireless’ cash to maintain its shareholder remuneration. “For Verizon, time is running out. Vittorio Colao holds the cards. And he seems to know it,” said Bernstein analysts Craig Moffett and Robin Bienenstock in a research note. However, the Financial Times notes that John Killian, Verizon Communications’ finance director, said this month that he could “handle our dividend” in 2010 and 2011 without any support from a Verizon Wireless dividend.