Cingular ups the ante on Vodafone
 |
Vodafone is said to be considering a bid of $35 billion for AT&T.
Story Tools
|
LONDON, England (Reuters) -- Cingular, the second-largest U.S. cell phone group, has thrown down the gauntlet to British rival Vodafone Group by raising its bid for AT&T Wireless to $38 billion, a source close to talks said on Monday.
Cingular Wireless, which is owned by SBC Communications and BellSouth, increased a $35-billion or $13-per-share cash bid for struggling AT&T Wireless Sunday.
The source said Vodafone was likely to follow suit on Monday.
"They (Cingular) have bid $14-per-share," the source said. "We believe Vodafone will at least meet it ... Vodafone couldn't match Cingular yesterday, and they needed today to do that."
A $14-per-share bid values AT&T Wireless at just over $38 billion.
Sources familiar with talks told Reuters on Sunday that AT&T Wireless, which put itself up for sale on January 22 after a series of lackluster results, asked Vodafone and Cingular for sweetened offers after both groups bid roughly $35 billion.
The auction for the third-ranked U.S. mobile phone group signals the start of long-awaited mergers in the fiercely-competitive U.S. mobile industry, in which six national brands and a handful of regional players are battling for market share.
Cingular, which is banking on savings from merging two U.S. networks, billing systems and staff cuts, raised its bid ahead of an AT&T Wireless board meeting on Sunday afternoon, the source said.
Market concerns that Vodafone's Chief Executive Arun Sarin will trump its arch-rival in an earnings-dilutive deal sent shares in the world's largest mobile phone group 2.94 percent lower to 131.8p by 1330 GMT.
"We do see Vodafone as a serious bidder now, but we still see Cingular in the driving seat," said one analyst. "They have more shareholder support and stand to get more synergies."
Calling for quick deal
AT&T Wireless, which has debt of around $5.9 billion, has yet to confirm it received any offers by last Friday's 1700 EST (2200 GMT) deadline, which gave it at least a three-day U.S. holiday weekend to evaluate offers.
Vodafone said last week that it was examining whether an offer, which would force it to sell a lucrative 45 percent stake in U.S. mobile phone market leader Verizon Wireless, would be in investor interests.
Since the bid deadline passed, the group argues it makes little commercial sense to reveal whether it bid.
AT&T Wireless, which is 16 percent-owned by Japan's NTT DoCoMo, has set itself a deadline of February 29 for a final decision, although sources say pressure is rising for a quick deal and an announcement could come as soon as Tuesday.
While some Vodafone investors remain unconvinced about the merits of a bold offer, a growing number are braced for Sarin to fight for an asset that would give the group long sought-for control of a company in the world's most powerful economy and take its brand across the Atlantic.
However, some analysts argue the bid would dilute earnings by 10-15 percent for around four years, that Vodafone has a poor record in running third-ranked operators in Japan and Australia and that giving up its Verizon Wireless stake in order to become a global brand smacks of ambition and empire-building.
"They (Vodafone) have a large, joint-position with the No. 1 company in the United States, so why pay up for the No. 3 and try to build up market share?" asked Kevin Lilley, a European equities fund manager at Royal London Asset Management.
"It does not make a great deal of sense to me and it will almost certainly be dilutive to earnings," he added.
However, sources close to Vodafone say the group is sure it can convince investors of its strategy if it wins AT&T Wireless.
Cingular, meanwhile, is armed with cash-rich parents whose determination to enlarge their mobile phone arm is driven in part by flat or shrinking fixed-line businesses.
Cingular says it can cut costs by an annual $3.0 billion by reducing overlapping staff and assets and co-owner SBC said in January it might consider a wireless deal that hurt earnings.
In the meantime AT&T Wireless is losing both money and customers. The group reported a fourth-quarter loss and in January alone lost nearly four percent of its customers and saw its operating income fall more than 20 percent from a year ago, sources close to the situation have said.
But hopes of a bid war sent its shares to almost $12 on Friday, valuing the group at $32.56 billion.
Copyright 2004
Reuters. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
