Vodafone says no to change in Verizon stake

Vodafone Group intends to keep its stake in Verizon Wireless, despite a proposal submitted by a large shareholder recommending a change in the holding.

The issue of Vodafone’s 45 percent stake in Verizon Wireless comes up during virtually every earnings report from Vodafone. Vodafone typically argues that while it keeps an eye on the investment and probably won’t hold on to it forever, growth at Verizon continues, so the investment is sound for now.

On Thursday, Vodafone said that Efficient Capital Structures, a group that controls 210,000 shares of the company, submitted several resolutions, including one suggesting that Vodafone either spin off or issue tracking shares of its Verizon Wireless interest.

Vodafone is required to submit the resolutions for vote during its annual shareholders meeting July 24.

Vodafone said that its share in Verizon has generated significant value and that a change in the structure of that investment would lose some of that value. A tracking share would probably trade low because of limited transparency, Vodafone said. A spinoff would also likely lead to lowered value because of difficulties in tax structures and because the board doesn’t think the United Kingdom is the natural place to list such shares.

Another resolution from ECS seeks to put a cap of £1 billion ($2 billion) on any acquisition or a maximum of £5 billion in aggregate acquisitions in any two-year period before 2010 unless the deal gets shareholder approval. Vodafone argues that such a rule would prevent it from competing for assets and would have precluded the company from making some historical buys, such as acquisitions in Romania, Turkey, and India.

The proposals from ECS add to pressure mounting on Vodafone CEO Arun Sarin. Last year, around 10 percent of shareholders voted against his re-election to the board. The vote came a few months after Vodafone revealed a £14 billion loss for the year ending in March 2006, marking a record loss for a U.K. company.