Hello all-
I am currently looking at the Verizon / Vodafone situation regarding their 55-45% respective ownership of Verizon Wireless.
At the moment Vz gets to consolidate all of Verizon Wireless's cashflows due to its control over these. However theoretically Vodafone has a 45% claim on the businesses FCF.
-If one were to workout Verizon's CROIC would you include the minority interest Verizon carries on its books in respect of Vodafone's interest in Verizon Wireless as part of the capital figure you use in the calculation?
- Alternatively would you subtract 45% of Verzion Wireless's cashflows to remove the amount attributable to Vodafone and then calculate CROIC based purely on the FCF attributable to owners of Verizon and the capital provided by Verizon's debt and equity holders?
-When doing a DCF analysis on Verizon would you need to calculate Verizon Wireless FCF separately and subtract 45% to exclude Vodafone's share? i.e. include only the 55% Verizon is entitled to in the DCF analysis thereby only considering the value flowing through to Verizon's shareholders?
Either way it would seem that calculating any metrics based on the Verizon groups consolidated FCF would be grossly distorted- and result in an inflated valuation for Verizon?
Any thoughts?
Thanks,
Raj.
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