Bloomberg News

AT&T Said to Still Eye Vodafone After Renouncing Takeover

January 29, 2014

AT&T Said to Still Be Interested in Vodafone Takeover Bid

A Vodafone store in Leipzig, Germany, on Sept. 12, 2013. AT&T may be interested in acquiring Vodafone. Photographer: Krisztian Bocsi/Bloomberg

AT&T Inc. (T:US) remains interested in a potential acquisition of Vodafone Group Plc (VOD) even after giving up the option to bid for the U.K. carrier for six months, according to people familiar with the situation.

The U.S. phone company continues to study a Vodafone takeover, and made a public announcement Jan. 27 to satisfy strict British stock-market regulations designed to limit merger speculation, the people said, asking not to be identified discussing a private matter. AT&T will probably need to wait out the deadline before making an offer, they said, although it can be waived with the consent of Vodafone’s board.

After reports of a meeting last week in Davos, Switzerland, between AT&T Chief Executive Officer Randall Stephenson and European Union telecommunications commissioner Neelie Kroes at which acquisitions were discussed, the U.K.’s Takeover Panel asked AT&T to clarify its intentions, the people said. In such a scenario, a potential bidder has two options: to acknowledge its interest, and “put up or shut up” with a firm bid within 28 days, or to walk away for half a year.

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Matt Morgan, a spokesman for Vodafone, and Mark Siegel, an AT&T spokesman, both declined to comment on AT&T’s interest.

AT&T chose the second option to avoid negotiating under such a tight deadline and because of the possibility of exemptions from the moratorium, the people said. Waiting for it to expire may also provide further clarity on European regulatory changes, and on the value of Vodafone shares after the British company completes a $130 billion sale of its stake in U.S. operator Verizon Wireless.

Shares Rise

Vodafone shares closed up 1.3 percent to 226.3 pence after rising as much as 3.1 percent in London. AT&T fell 1.2 percent to $33.31 at the close in New York.

Stephenson, whose $39 billion offer for T-Mobile US Inc. was rebuffed by regulators in 2011, has always envisioned any deal for Vodafone as a friendly one to reduce the odds of failure, the people said. AT&T may still decide not to proceed with a bid, they said.

The U.K.’s Takeover Code, which applies to offers for all London-listed companies, was tightened in the wake of the protracted hostile purchase of confectioner Cadbury Plc by Kraft Foods Group Inc. It requires bidders to state their intentions after media reports or share movements suggest an offer is on the way.

AT&T Earnings

In AT&T’s fourth-quarter earnings call yesterday, Stephenson said the company’s interest in Europe hasn’t changed, and its declaration that it isn’t bidding for Vodafone in the near term “speaks for itself.”

The second-largest U.S mobile operator forecast 2014 profits at the low end of analysts’ estimates as competition intensifies in its home market. It’s offering discounts to compete with Sprint Corp. and T-Mobile US, the third- and fourth-largest U.S. carriers, which are cutting prices and investing in networks in an effort to break the dominance of AT&T and Verizon Communications Inc.

To be sure, winning Vodafone’s approval for a deal won’t necessarily be easy. While Vittorio Colao, the British company’s chief executive, is not opposed in principle to a sale, he is looking for deals that will bolster a standalone strategy, said people familiar with his strategy.

The Newbury, England-based company is seeking to acquire Grupo Corporativo ONO SA, a Spanish fixed-line operator that would allow Vodafone to offer a broader range of services in the country, people familiar with the company’s plans said this week. A Vodafone purchase of ONO wouldn’t impact AT&T’s interest, another person said.

ONO Offering

The Spanish company could be valued at about 6.4 billion euros ($8.7 billion), according to Francisco Salvador, a Madrid-based strategist at FGA/MG Valores. Ono made a preliminary filing this week with Spain’s market regulator for an initial public offering, the size of which hasn’t been finalized, people with knowledge of the matter said.

Vodafone last year agreed to buy Kabel Deutschland Holding AG for 7.5 billion euros to add to its fixed-line network in Germany.

AT&T meanwhile has expressed interest specifically in Europe’s move into faster, fourth-generation wireless networks, which are a few years behind the 4G services in the U.S. and present the opportunity for carriers to charge a premium.

Dallas-based AT&T has made internal preparations for a Vodafone bid this year, people with knowledge of its deliberations said in October. Planning for a possible deal has included analysis of which Vodafone assets would later be sold and developing a commercial strategy for countries like Germany and the U.K.

Other obstacles remain. Kroes, who is the EU’s top telecommunications official, has expressed concerns to AT&T about spying by the National Security Agency, and about protecting price competition in Europe, where average bills in most countries are lower than those in the U.S., according to a person familiar with the matter.

To contact the reporters on this story: Matthew Campbell in London at mcampbell39@bloomberg.net; Amy Thomson in London at athomson6@bloomberg.net; Scott Moritz in New York at smoritz6@bloomberg.net

To contact the editors responsible for this story: Nick Turner at nturner7@bloomberg.net; Kenneth Wong at kwong11@bloomberg.net; Aaron Kirchfeld at akirchfeld@bloomberg.net; Jeffrey McCracken at jmccracken3@bloomberg.net


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