Bloomberg News

AT&T Gives Up Right to Bid for Vodafone Within Six Months

January 27, 2014

Vodafone Store

A logo sits on a sign above the entrance of a Vodafone store, operated by Vodafone Group Plc in London. Photographer: Jason Alden/Bloomberg

AT&T Inc. (T:US), responding to speculation over a possible takeover bid for Vodafone (VOD) Group Plc, said it doesn’t plan to make an offer for the U.K. wireless carrier. Vodafone shares fell the most in four months in London trading.

The statement means AT&T can’t offer to buy Vodafone or a stake of 30 percent or more in the company for the next six months, according to U.K. takeover rules. AT&T said it made the announcement today at the request of the U.K. takeover panel.

Executives of Dallas-based AT&T were laying the groundwork internally for a potential acquisition of Vodafone this year, people with knowledge of the matter told Bloomberg News in November. While AT&T is now ruling out an immediate offer for Vodafone, with a market value of $180 billion before a sale of its U.S. venture is completed, it could make a bid later on, said Simon Weeden, an analyst at Citigroup Inc. in London.

“The move could indicate that AT&T is either uninterested altogether or merely unprepared to start a process today given time constraints,” Weeden said in a note to clients.

Vodafone could be worth $130 billion to an acquirer after it sells its stake in U.S. carrier Verizon Wireless to partner Verizon Communications Inc. (VZ:US), Sanford C. Bernstein analyst Robin Bienenstock has estimated. Vodafone agreed to divest its holding in the U.S. venture last year for $130 billion, with $84 billion set to be distributed to shareholders after the deal’s completion, scheduled for next month.

Stock Drops

Vodafone fell 3.9 percent to close at 223.55 pence in London, the steepest decline since Sept. 3. The stock sank as much as 7.2 percent earlier today. AT&T rose less than 1 percent to $33.51 at the close in New York.

AT&T has been looking to Europe for growth as its home market becomes more competitive. T-Mobile US Inc. and Sprint Corp., the fourth- and third-largest carriers, are cutting prices and offering additional mobile data in an effort to break the dominance of AT&T and Verizon Communications Inc.

At the World Economic Forum last week, AT&T Chief Executive Officer Randall Stephenson met informally with European Union digital commissioner Neelie Kroes to discuss potential European acquisitions, said a person with knowledge of the matter.

At the event in Davos, Switzerland, Stephenson and Kroes, Europe’s top telecommunications official, discussed the possibility of an AT&T bid for Vodafone or another European carrier, as well as regulatory issues, the person said. The meeting was earlier reported by Sky News.

Beneficial Delay

It may be in AT&T’s interest to postpone any bid, said James Britton, an analyst at Nomura Holdings Inc. in London. A delay means that AT&T will get to see Vodafone’s financial forecasts for the next fiscal year, he said. AT&T will also have more time to see how pending European regulation on competition, consolidation and spectrum policy will play out, Britton said.

“Our view remains that AT&T remains interested in European mobile assets and is likely to target Vodafone later in the year,” Britton said.

Ben Padovan, a spokesman for Newbury, England-based Vodafone, declined to comment.

An acquisition would give AT&T immediate access to markets including the U.K. and Germany, with Vodafone continuing to add wireless and broadband assets in Europe. It acquired Kabel Deutschland Holding AG for more than $10 billion in October and is seeking to buy Grupo Corporativo ONO SA, the Spanish cable operator that is preparing for an initial public offering, two people familiar with the matter said.

Global Giant

The British company competes for wireless customers with the likes of Telefonica SA (TEF) and Deutsche Telekom AG (DTE), and in broadband services with companies including billionaire John Malone’s Liberty Global Plc (LBTYA:US), which today agreed to fully take over Dutch cable provider Ziggo NV (ZIGGO) for 4.9 billion euros ($6.7 billion).

An acquisition would mean AT&T taking over Europe’s biggest wireless carrier and creating the world’s largest telecommunications operator by sales. With more than 500 million wireless subscribers worldwide, the combined company would be able to challenge Google Inc. and Apple Inc. when negotiating handset subsidies and wringing profit out of nascent technologies such as mobile advertising.

Informal Talks?

“My expectation would be that AT&T and Vodafone are already talking informally about potentially how the two sides may or may not work together,” said Mark Newman, an analyst at research firm Informa in London. Today’s statement “buys them some time,” he said.

AT&T has also considered other European takeover targets, examining candidates including Spain’s Telefonica and EE, the U.K. joint venture of Deutsche Telekom and Orange SA (ORA), people familiar with the matter said last year.

AT&T forgoing a bid would be a disappointment to Europe’s telecommunications executives and investors looking for consolidation in the market. Europe has more than 100 wireless carriers, weighing on prices and earnings, and operators have struggled to gain regulatory approvals for mergers.

“This is a massive setback for the investors hoping for a rapid consolidation in the EU telco sector,” said Leopold Salcher, an analyst at Raiffeisen Capital Management. “The sector has seen a huge re-rating in the last six to nine months. These hopes have to be reset.”

According to U.K. takeover rules, AT&T’s statement means it can’t offer to buy Vodafone or a stake of 30 percent or more in the company for the next six months, except under certain conditions. Those include Vodafone’s board agreeing that AT&T’s statement is ignored, another company offering to buy Vodafone, or authorities deciding that there has been a material change of circumstances.

To contact the reporter on this story: Amy Thomson in London at athomson6@bloomberg.net

To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net


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Companies Mentioned

  • T
    (AT&T Inc)
    • $35.02 USD
    • 0.07
    • 0.2%
  • VZ
    (Verizon Communications Inc)
    • $49.21 USD
    • 0.25
    • 0.51%
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