Fitch keeps Vodafone on watch

Fitch Ratings said it maintained Vodafone Group plc's A- long-term issuer default rating on rating watch negative following the announcement of its intentions to dispose of its 45% stake in Verizon Wireless for $130 billion.

The event-driven rating watch negative reflects two possible outcomes upon completion of the Verizon transaction. Vodafone's rating could be affirmed at A- if the disposal of the company's Verizon stake is successfully completed and if management continues to pursue conservative financial policies that give Vodafone the financial flexibility to deal with any erosion of its consolidated financial performance.

An A- rating with a negative outlook is possible even after the sale of the Verizon stake. Net debt would be lower but Vodafone's cash flow would be more exposed to its weak Southern European operations and slowing emerging market growth.

Fitch said it is also concerned that potential acquisitions could erode the £20 billion cash, which Vodafone is retaining from the Verizon disposal.

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