Financial Times_11/15
VODAFONE: Going courting with a nervous look
Richard Waters in New York finds timing may be a vital factor in Vodafone AirTouch's pursuit of Mannesmann
As Vodafone AirTouch edges towards an embrace of Mannesmann, it is with one eye over its shoulder, across the Atlantic. And though there is no sign yet of a rival US bid emerging for the German carrier, it seems a fair chance that a protracted battle would eventually draw in at least one American suitor.
That consideration has helped to spur Chris Gent in bringing forward his own plans for a merger. At this stage, the Vodafone chief executive has two things in his favour, but neither factor is guaranteed to last.
One is timing. With the big American carriers in the throes of their own domestic mergers, an aggressive move into Europe on such a large scale at this stage would be a big distraction.
Bernie Ebbers, chief executive of MCI WorldCom, last month reached a $115bn (œ70bn) deal to buy Sprint, the biggest acquisition yet, and has little room to manoeuvre, according to one person close to the company.
The deal guarantees Sprint shareholders a set value in WorldCom stock, provided the shares trade within a certain range: that collar will be a big restraint on the WorldCom chief mounting any other big, potentially dilutive offers meanwhile.
SBC Communications and Bell Atlantic, the two super-Bells emerging from the spate of mergers in the local telecommunications markets, may also have more pressing local matters on their minds than a big foray into Europe.
SBC recently completed its purchase of Ameritech, potentially putting it in a position to consider its next big strategic move. However, two other factors besides Europe loom large on the horizon for the Texas-based company.
One is a need to follow through on promises made to regulators as a condition of its Ameritech merger, including a promise to build local networks in many of the biggest cities outside its existing markets. At the same time SBC has turned its sights to the south, looking to expand its pres ence in Latin America. Its Ameritech purchase has left it with a big portfolio of European interests, but it would be a massive step from there to stake all on an attempt to dominate the European wireless market, said one person who follows the company. Bell Atlantic also has its hands full at home: it is further behind than SBC in its own latest merger, the planned acquisition of local carrier GTE, and recently agreed a joint venture with Vodafone that will leave the New York-based carrier with management control of the two companies' combined US wireless network.
Bell Atlantic's own efforts earlier this year to buy AirTouch were mounted mainly to complete its national presence, though it also expressed a keen interest in the company's collection of European interests. Its new partnership with Vodafone also makes a rival bid for Mannesmann less likely - though as Mannesmann itself demonstrated with its purchase of Orange, alliances can quickly turn to enmities as cross-border consolidation heats up.
The second factor in Vodafone's favour is its stock. This has already proved a powerful acquisition currency, and one that it used to squeeze out Bell Atlantic in the battle for AirTouch. With WorldCom, which has also been skilful in using a high stock-market valuation to lead the consolidation of the US long-distance industry, on the sidelines for now with its Sprint bid, other carriers would find it too expensive to use their own stock.
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