Vodafone poised for $35bn deal
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Rumors abound of a $35 billion takeover bid for AT&T Wirelss, and Vodafone's silence is doing nothing to douse speculation.
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LONDON (Reuters) -- Mobile phone giant Vodafone Group failed to douse speculation it had decided to launch a bid of around $35 billion for U.S. rival AT&T Wireless.
Ahead of Friday's bid deadline, talk swirled Vodafone has called a board meeting to seek clearance for a bid to trump an informal $30 billion or $11-per-share cash offer from Cingular, the number two U.S. cell phone group.
The market is braced for a stand-off between Vodafone's Chief Executive Arun Sarin and Edward Whitacre Jr, the Texas-born head of U.S. carrier SBC Communications, who controls Cingular with U.S. carrier BellSouth Corp.
Hopes of a Vodafone bid at between $12 and $12.5-per-share sent shares in AT&T Wireless, the struggling third-ranked U.S. mobile group, surging to fresh 12-month highs.
The stock stood 3.5 percent higher at $11.90 by Europe's market close Thursday, valuing the group at around $31 billion.
Vodafone, the world's largest mobile phone group with one of the industry's strongest takeover records, insisted it was still exploring whether a deal with AT&T Wireless was in investor interests. It declined to comment further.
"They will bid and I think they have to bid to win," said one financier. "These things take management time. You have to talk to your partners. And if you don't put your best foot forward, the other side will spot it pretty quickly."
Vodafone's stock, which has fallen around seven percent on recent bid concerns, closed 0.4 percent higher at 132.25p.
A growing number of Vodafone investors believe Sarin will bid for an asset that would give British-based Vodafone long sought-for control in the world's most powerful economy and bring its brand across the Atlantic for the first time.
Market experts say a $30 billion-plus bid by financially-powerful Vodafone might not even risk its "A" mid-investment grade credit rating. Some analysts warned outbidding Cingular, which can sweeten its bid with the cost cuts it expects from merging two networks, would be tough to justify.
"It's sensible for Vodafone to look at the asset, because by submitting interest it will gain access to the management accounts," said one fund manager, who holds about one percent of Vodafone's stock.
"But they would have to make a very strong (investor) case to buy it...I am 99 percent convinced Cingular will end up owning the asset. It has to be worth more to Cingular."
Market reaction to any Vodafone deal, which analysts say could dilute earnings for around four years, hinges in part on whether Vodafone can negotiate a satisfactory price for its 45 percent stake in U.S. mobile market leadar Verizon Wireless.
The stake is valued at $20 billion-$25 billion. But an exit could leave Vodafone with a tax bill of up to $6.0 billion, analysts and investors have said.
Cingular has made no secret of its desire to win AT&T Wireless. It says it can slash up to $3 billion in annual costs in a merger by cutting staff and overlapping businesses.
SBC said in January the U.S. mobile industry, in which six major national brands and a handful of regional players battle for market share, was ripe for mergers -- and that it would consider certain purchases even if they hurt earnings.
A Cingular takeover of AT&T Wireless would eliminate one rival in one of the world's most overcrowded mobile markets.
Investors said they expected AT&T Wireless, which is 16-percent owned by Japan's NTT DoCoMo and which put itself up for sale three weeks ago, to announce an auction outcome on February 29.
Copyright 2004
Reuters. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
