Vodafone set to sweet-talk Mannesmann
July 11 1999
BUSINESS NEWS
Andrew Lorenz
VODAFONE AIRTOUCH, the British-American
mobile-phone giant, wants to forge an alliance with
Mannesmann, the German cellular operator.
Analysts believe Vodafone is aiming eventually to absorb
Mannesmann, creating a mobile grouping of enormous
power, one that would dominate Europe and have strong
positions in America and Asia.
At current ratings, such a grouping would be Europe's largest
company by market worth: Vodafone AirTouch is valued at
£82.7 billion, while Mannesmann is worth £37.8 billion.
Chris Gent, Vodafone's chief executive, indicated to analysts
last month the company had no plans to bid for
Mannesmann. But Gent added that, if the German group
ever needed help, Vodafone would be ready to provide it.
Mannesmann is keen to remain as an independent, but
industry experts have discerned in recent months an
increasing warmth in its relations with Vodafone.
Gent's comment was seen by analysts as a declaration that
Vodafone would intervene as white knight if a rival operator
tried to buy Mannesmann. There has been speculation that
British Telecommunications would like to buy the German
group, although some BT watchers believe its preference
would be links with Mannesmann in specific areas.
Mannesmann and Vodafone are partners in a string of
Europe's top mobile operations. In Germany, Mannesmann
owns 65% of D2, the chief mobile rival to Deutsche
Telekom, with Vodafone holding the rest. In Italy Vodafone
is a minority partner in the OPI business just acquired by
Mannesmann from Olivetti. And in France the two hold
stakes in Cegetel, the principal mobile challenger to France
Télécom where BT also has a stake.
Vivendi, the lead shareholder in Cegetel, is a potential rival
for Vodafone as a partner for Mannesmann. Some industry
watchers believed the two might join forces to bid for
One2One, the British mobile operator put up for sale by its
co-owners, Cable & Wireless and MediaOne.
But with the One2One auction now in its final month, such a
link-up now looks unlikely. If Mannesmann were to buy the
company, it would complicate its relations with Vodafone
because of Vodafone's position as the British mobile market
leader.
One2One seems likely to go to either Deutsche Telekom -
which has held back from the bidding but could make a late
entry - or France Télécom. France Télécom is believed to
be planning a low bid but is seen as the most likely buyer
saving a Deutsche intervention.
The prospect that bids will not exceed £7 billion-£7.5 billion
- at least £1 billion below initial expectations - has raised the
possibility that One2One may be floated rather than sold.
But analysts believe that One2One's owners and its advisers,
Merrill Lynch and Lehman Brothers, are in a difficult position
because it would be hard to float One2One for much more
than the price offered by a trade buyer. "I don't see how they
can go the float route," said one expert. "They will have to
settle for what they can get in the auction."
The possibility of a late intervention by Deutsche Telekom
appears to hold out the owners' best hope of attracting a
reasonable bid for One2One.
Deutsche is already poised to expand in Britain by taking
over as the sole partner of Energis in the Metro joint venture
to build a leading-edge fibreoptic network linking British
cities.
France Télécom is also a Metro partner, but it is expected to
withdraw following the rupture of its previous alliance with
Deutsche.
Their relationship broke up when Deutsche unilaterally tried
to buy Telecom Italia but was foiled when Olivetti took over
the company.
The Sunday Times revealed last week that Deutsche
Telekom and France Télécom are among a clutch of giant
operators which have courted Cable & Wireless in recent
months.
Other C&W suitors include the American duo Bell Atlantic,
which dominates local services on the US eastern seaboard,
and SBC Communications, the big West Coast carrier.
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