Vodafone shareholders: Keep Verizon stake

Shareholders of Vodafone Group soundly rejected a proposal to spin off the company’s stake in Verizon Wireless on Tuesday, signaling they want the British mobile operator’s management to stay the course.

Vodafone, which has cellular businesses in 23 countries around the world, owns 45 percent of Verizon Wireless. Incumbent wireline carrier Verizon Communications holds the other 55 percent.

Efficient Capital Structures (ECS), an investor group, presented a resolution for Vodafone’s Tuesday annual meeting that called on the carrier to either create a new holding company consisting of its stake in Verizon Wireless or create a separate tracking stock so investors could choose to buy into that part of Vodafone. ECS argued investors can’t take advantage of Verizon’s success today.

“The investment is ‘buried’ within Vodafone’s Emerging Markets division, preventing the market from valuing it directly,” ECS Chairman Glenn Cooper said in a statement to shareholders. He also argued that because Verizon uses CDMA while the rest of Vodafone’s networks are based on GSM, it should be broken out.

However, less than 5 percent of Vodafone shares were voted in favor of the resolution, one of a series of proposals by the group that the company’s board opposed. All of them were voted down.

Verizon Wireless is one of the two dominant mobile operators in the U.S. Rival AT&T has 62 million subscribers to Verizon’s 60 million, but Verizon had slightly more revenue last year at about US$38 billion. Vodafone’s stake in the operator gives it a toehold in the U.S. mobile market but doesn’t allow it to run its own business or build up its brand. Vodafone tried to acquire AT&T Wireless in 2004 before that company was acquired by Cingular.

Joint ownership also leaves Verizon Communications without full ownership of its cellular business, which rival AT&T now has. That may make it easier for AT&T to bundle wired and wireless services for subscribers.

Last week, Vodafone denied reports that it was considering buying all of Verizon Communications and then spinning off the wireless business. Vodafone had 198.6 million customers across Europe, the Middle East, Africa, and the Asia-Pacific region at the end of last year.