Feature Article

August 22, 2014

Vodafone: The Hunter or the Hunted?

Is Vodafone the hunter or the hunted? One might argue it is hard to say, and that is a relatively unusual situation for a tier one service provider. In most cases, a reasonable observer would rather successfully be able to separate firms into buyers and sellers. With Vodafone, it is hard to say.

For starters, Vodafone has a significant war chest to fuel its own potential acquisitions, based on the cash it received when it sold its big stake in Verizon Wireless to Verizon Communications.

On the other hand, AT&T was rumored to be mulling a bid to buy Vodafone. A bit over six months ago, AT&T told U.K. regulators it had no plans to make a bid to buy Vodafone. That meant AT&T could not make any such bids for a period of six months, which ended in July 2014.

Now there once again are rumors AT&T is circling around, as well as rumors that China Mobile is looking. As often is the case for public companies, share price weakness often signals danger, and that appears to be the case for Vodafone, again.

But AT&T also is in the midst of a significant deal to buy DirecTV, and has been rumored also to be thinking about a purchase of Eircom, the Irish carrier.

Some might argue AT&T is spreading its bets, on the assumption that one or more potential big deals might not gain regulatory clearance.

To be sure, AT&T (actually SBC, which bought AT&T and then rebranded), which has grown primarily through acquisition, can be expected to continue with that pattern, as the firm has a well-regarded acquisitions team, and a track record of growing by sizable acquisitions.

AT&T, by buying Vodafone, likely would become the world’s largest telecommunications operator, measured by revenues.

But some think China Mobile also is interested in an investment of some size, possibly to create joint ventures in Africa.

Vodafone has been seen as a takeover target ever since chief executive Vittorio Colao agreed to sell the company’s 45 percent stake in Verizon Wireless to Verizon for £70 billion in September 2013.

That, despite Vodafone’s ability to use cash to make its own acquisitions, is because Vodafone became a “pure play” operator of all its businesses, without the downside of a major, but non-controlling stake in Verizon.

Vodafone also offers any potential acquirer both European and African market opportunities.

Edited by Alisen Downey

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