Vodafone Group PLC has decided to keep a 45 percent stake in Verizon Wireless Inc. in a move to retain a toehold in the important U.S. mobile phone market.

Europe's largest mobile phone operator announced its decision on Wednesday, a day ahead of the Aug. 9 deadline for the company to exercise a final option to sell its minority stake, valued at around US$50 billion.

The decision is likely to disappoint Verizon Communications Inc., which owns 55 percent of Verizon Wireless Inc. and had hoped to gain full control of the mobile operator.

Nor will it please Vodafone shareholder Efficient Capital Structures, which had sought investor support for a plan to spin off or create a tracking stock for the Verizon Wireless stake.

In a terse statement, Vodafone said it chose to hang onto its stake because of the "strong growth prospects" it sees at Verizon Wireless.

But what the company plans in the U.S. -- beyond seeing the value of its investment grow -- remains to be seen.

Although the stake gives Vodafone a foothold of sorts in the U.S., it doesn't allow the U.K. mobile phone company to run its own operations or establish a brand.

Also, different mobile phone technologies have made it difficult for the two companies to collaborate in the service area. Verizon uses CDMA (Code Division Multiple Access) technology while Vodafone's networks are based on the more widely used GSM (Global System for Mobile Communications) system.

Consequently, Vodafone remains unknown to most consumers and businesspeople in the U.S.

Last month, the British operator denied reports that it was considering buying Verizon Communications.

In 2004, it made a bid for AT&T Wireless Services Inc. before that company was acquired by Cingular Wireless.

» posted by abennett

IDG News Service

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