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Technology Stocks : Vodafone-Airtouch (NYSE: VOD)
VOD 14.17+1.6%Jan 23 3:59 PM EST
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To: MrGreenJeans who wrote (2181)11/26/1999 10:04:00 PM
From: MrGreenJeans  Read Replies (1) of 3175
 
TELECOMS: A game of musical chairs

The European telecommunications industry is like a game of musical chairs. Each time the music stops, one more chair is removed. At the end of the game, there will be perhaps only four or five seats left for pan-European players. Hence the desperation among those who want to stay the course to dive for any vacant chair - or even shove aside somebody already sitting there.

This thinking explains both Mannesmann's bid for Orange and Vodafone AirTouch's subsequent bid for Mannesmann. It also explains Vodafone's attempt to lock up Airtel, Spain's second mobile operator. Airtel is an important sideshow. If Vodafone wins control, it has a riposte to the jibe that its fistful of minority stakes make it like an investment trust.

Not surprisingly, those prepared to sell their seats can command high prices. Hutchison Whampoa has already demonstrated this in Orange. Now it looks as though BSCH and a group of Spanish investors will achieve the same with Airtel. Their ability to play off Vodafone against British Telecommunications has further enhanced their leverage. The net result is a mooted valuation of E24bn.

Another player that should be considering selling its seat is Vivendi, the leading shareholder in Cegetel, France's second telecoms operator. Vivendi has an opportunity to play off not just Vodafone and BT but Mannesmann too. If either Vodafone or Mannesmann won Cegetel, this would have a big impact on their bigger battle. So Vivendi is in a position to extract maximum value. Cegetel could easily be valued at E50bn. On the other hand, if Vivendi waits until the main battle is over, its negotiating position could be weaker. Two competing buyers may have merged into one.
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