Vodafone to return £1.5bn to shareholders despite loss

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U.K. mobile giant warns conditions in Europe likely to remain tough for rest of 2012.

Vodafone Group PLC said Tuesday that it will receive a GBP2.4 billion dividend from its U.S. joint venture Verizon Wireless, more than half of which will be returned to shareholders via a share buyback, as the mobile giant swung to a net loss in the first-half hit by economic woes in Spain and Italy.

Vodafone plans to return GBP1.5 billion to its shareholders once Verizon Wireless, its mobile joint venture with Verizon Communications Inc., pays out $8.5 billion later this year — its second cash distribution in nine months.

Verizon Wireless, which is 45% owned by Vodafone and 55% by Verizon Communications, had made a $10 billion payout in January, its first dividend in six years.

Vodafone swung to a GBP1.98 billion loss in the six months ended Sept. 30 from a net profit of GBP6.68 billion a year earlier, hit by impairments totalling GBP5.9 billion for Spain and Italy where teh economic backdrop has worsened and the company has been forced to widen discounts.

Revenue fell 7.4% to GBP21.78 billion from GBP23.52 billion, slight below market expectations of GBP21.82 billion.

The company, the world’s second-biggest mobile operator by subscribers after China Mobile, is being battered by grim economic conditions across Europe as consumers and businesses keep a tight rein on spending. Vodafone generates around three quarters of its profit in Europe, but has operations straddling the globe including the U.S, Africa, India, the Middle East and Australia.

Vodafone warned in May that conditions in Europe were likely to remain tough for the rest of the year as the operator booked a 13% drop in annual net profit and a GBP4 billion impairment charge. At the time, Vodafone cut its forecast for fiscal 2013, saying revenue from phones services will be “slightly below” its previous medium-term guidance range of 1% to 4%, blaming bigger-than-expected cuts imposed by regulators on the tariffs telecom companies charge each other for routing outside calls over their networks. But Tuesday it upgraded its guidance for annual adjusted operating profit, sayign it should now reach “the upper half” of the range of GBP11.1 billion to GBP11.9 billion” provided in May, thanks to the strong performance by Verizon Wireless.

Vodafone declared an interim dividend of 3.27 pence, up 7.2% from a year earlier.

Vodafone shares closed at 167 pence Monday, valuing the company at GBP81.94 billion. The shares have fallen 6.9% since January on concerns about its performance in Europe.