Sunday Times: BT seeks US ally for £36bn AirTouch bid
January 10 1999
Andrew Lorenz and
Kirstie Hamilton
A HUNT for a local partner to join in a £36 billion bid for
AirTouch, the American mobile-phone group, has been
launched by British Telecommunications. The aim is to
counter Vodafone's AirTouch bid.
Wall Street investment bankers said that last week BT notified
Morgan Stanley, the investment bank advising AirTouch, of its
interest in buying the company, America's largest independent
cellular operator.
BT, whose adviser is NM Rothschild, appears keen to own
AirTouch's panoply of international mobile interests, which
include attractive stakes in licences in Germany, Italy, Spain,
where AirTouch is partnered by BT, and France. AirTouch's
overseas interests could be worth about £18 billion, analysts
say.
BT is believed to have considered a bid for AirTouch last year
but had to concentrate on clinching a network-services joint
venture with AT&T.
BT has abundant firepower to fund a large bid. "It could
muster about £9 billion in cash without raising an eyebrow,"
said one analyst. With its shares close to their peak, its paper
would also be attractive.
But the terms of the AT&T venture bar BT from competing
with AT&T in its home market, so BT must find an American
ally if it is to join the AirTouch battle. Wall Street bankers
believe one American player BT may have approached is Bell
Atlantic, the East Coast local operator that sparked the
AirTouch battle with a £27 billion bid.
That offer was countered by Vodafone, Britain's leading
mobile-phone company, which has used its high-flying share
price to make a £33 billion offer for AirTouch. The two
companies know each other well and have considered a
possible merger or alliance several times in the past four
years.
A combination of Vodafone, advised by Goldman Sachs, and
AirTouch would create a group with a larger market worth
than BT, which is valued at £61.8 billion, compared with
Vodafone's £32.9 billion.
BT cannot link up with AT&T to bid for AirTouch because
the two American companies are the top domestic
mobile-phone operators. Even though the two combined would
have less than 25% of the market, regulators are thought
highly unlikely to let a deal through. BT is considering a
number of candidates that could make suitable partners for an
AirTouch bid. Among these, Bell South and South Western
Bell are favoured by analysts.
Meanwhile, MCI WorldCom has ruled itself out of the bidding.
"We reviewed the strategy and decided it was not worth
pursuing," it said.
Vodafone, which stepped in with a counter offer for AirTouch
after news of its talks with Bell Atlantic leaked nine days ago,
is awaiting a response from the San Francisco firm. |
