Credible reports are emerging out of the US that AT&T is putting together a bid for Vodafone, a deal which would make the combined company the largest telco in the world by far.
AT&T is already number one, with revenues of US$127 billion, but its revenues are almost all in the US and it is not strong in mobile. It sees a purchase of Vodafone as a way to quickly gain a strong presence in Europe. It reportedly is not interested in many of Vodafone’s other subsidiaries, and before making a bid it wants to be sure it can unload the assets it does not want.
Vodafone, with annual revenues last year of £46 billion, is the world’s seventh largest telco by revenues, and the most internationally dispersed, with operations in 65 countries. It owns 50% of Vodafone Australia.
The speculation is based largely on a report from news agency Bloomberg, quoting the usual unnamed ‘sources familiar with the situation’. The reports says no formal discussions are underway, but that AT&T is laying the groundwork by identifying potential buyers for Vodafone subsidiaries, largely in emerging markets, the sale of which could defray some of the costs of acquisition.
The report says AT&T might do that by aggregating the businesses it does not want into one separate holding company, then selling that to a single buyer. Under that circumstance a possible purchaser would be Mexico’s America Movil, controlled and largely owned by Carlos Slim, sometimes mentioned as the world’s richest man. AT& owns 9% of America Movil and has two seats on its board.
Any bid would also have to wait until Vodafone completes its massive US$130 billion sale of its half share of Verizon Wireless, which would have been a regulatory impediment to any acquisition by AT&T.
That sale will make Vodafone cash-rich, making it an even more attractive takeover target. Vodafone’s shares on the London Stock Exchange rose 3.6% to 232.5p on the rumours.
Vodafone’s market capitalisation is £90 billion. An acquisition of this size would be the second largest in history, exceeded only by Vodafone’s own acquisition of German company Mannesmann in 1999.