Verizon Wireless’ recent dividend payments to parent companies Verizon Communications and Vodafone Group could begin to slow as the wireless carrier turns to paying down its own debt and prepares for upcoming spectrum auctions.
Speaking at the JP Morgan Global Technology, Media and Telecom Conference this week, Verizon EVP and CFO Fran Shammo noted that the recently announced $7 billion dividend payment could be the only payment made this year as Verizon Wireless looks to pay off $5 billion worth of debt by early next year and prepare for a planned 2014 spectrum auction. That auction is to include 600 MHz spectrum licenses as part of the Federal Communications Commission’s incentive auction process.
“As I have said before, as auctions come up for spectrum they only come up opportunistically at times,” Shammo explained. “And you have to take them when they come, because spectrum is not an unlimited resource; so you need to provide for that.”
Shammo did add that Verizon Wireless was comfortable with its current spectrum position, which has been re-jiggered through recent deals in the 1.7/2.1 GHz band and 700 MHz band, noting that the carrier did not really need new spectrum for the next “four to five years.” You can bet that comment could come back to haunt Verizon should some industry trade groups look to limit the amount of participation from larger carriers in any upcoming spectrum auction.
As for operations, Shammo noted that about one-third of Verizon Wireless’ current customer base was on a Shared Data plan, which should help the carrier maintain its current 8% revenue growth for at least the near term.
Verizon is also looking to pull $2.5 billion in expenses out of its wireless operations, with Shammo noting savings from its call center structure and device logistics. Verizon Wireless has also said that it was mostly through with its LTE rollout, with plans to hit coverage equal to its legacy CDMA network by the end of this year. That, along with cutting back on CDMA network investments should allow the carrier to further reduce overall capital expenditures.
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