Vodafone shareholders eye potential £5bn windfall

Beleaguered Vodafone shareholders were today eyeing a potential £5bn (€7.3bn) pay-day from the mobile phone company’s under-pressure chief executive.

Beleaguered Vodafone shareholders were today eyeing a potential £5bn (€7.3bn) pay-day from the mobile phone company’s under-pressure chief executive.

The prospect of a record special dividend for a British company emerged after Arun Sarin indicated that the successful sale of Vodafone’s Japanese subsidiary would prompt it to consider the best way of returning cash to shareholders.

Mr Sarin is said to be facing investor unrest after a series of disappointing updates culminated last week with a warning that revenues growth may slow.

Shares slumped to a three-year low but recovered 8% on Friday as investors cheered confirmation that Vodafone was in talks about cutting its exposure to the competitive Japanese market. Analysts believe a sale of a controlling stake to Softbank could net between £6bn (€8.7bn) and £8bn (€11.7bn) for Vodafone.

Mr Sarin told the Sunday Telegraph that he hoped an agreement could be reached within three to four weeks – raising hopes in the markets for a £5bn (€7.3bn) special dividend at the end of the company’s financial year in May.

He said: “Just look at our track record. It is to return money to shareholders. We are returning £6.5bn (€9.5bn) through a share buy back this year and more through dividends.

“When you bring Japan into the picture we will have to sit down and think about what is the best way – the most efficient, most value-enhancing way – of returning this money to shareholders.”

The report said Vodafone was likely to opt for a special dividend payment, rather than buying back shares from investors.

While dividends are liable to taxation in the UK, a third of Vodafone’s investors are in the United States where tax on dividends has been cut.

A payment of £5bn (€7.3bn) would better the £4.2bn (€6.1bn) offered by Hilton Group following the disposal of its hotels to its American sister company.

A spokesman for Vodafone said today: “If and when a deal is announced, we will clarify at that time what we will do with the proceeds.”

Analysts believe the sale of the Japanese business will give Mr Sarin breathing space as he looks to complete his One Vodafone restructuring.

He also told the Sunday Telegraph that he believed he faced bigger challenges than those encountered by predecessor Christopher Gent.

Mr Sarin, who has been chief executive since July 2003, added: “It is a hard job. Because we don’t have easy growth we have to work harder for our profits and revenues. Clearly it’s a more difficult time now. But that is symptomatic of the industry.”

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