Another WSJ piece (Vodafone, AirTouch stuff). Last paragraph is definitely worth reading. Sorry if already posted.
January 19, 1999
Market Lifts Vodafone Shares,
Approving AirTouch Purchase
By WILLIAM BOSTON, MATTHEW ROSE and BRANDON MITCHENER
Staff Reporters of THE WALL STREET JOURNAL
Investors gave Vodafone Group PLC and AirTouch Communications Inc. a
ringing endorsement of their proposed $58 billion merger, driving shares in
Vodafone up 15% in London trading Monday and electrifying stock prices
across the European telecommunications sector.
The markets had reason to cheer. Assuming that Vodafone completes its
acquisition as planned, the resulting mobile-phone behemoth will not only
become the world's largest cellular group. It will also overtake former state
monopoly British Telecommunications PLC as Britain's biggest phone company
and become the third-largest stock on the Financial Times-Stock Exchange
100-Share Index.
"Ten years ago, you had never heard the name
Vodafone," said Sam Ginn, AirTouch's chairman
and chief executive, at a London news
conference called to outline details of the deal.
"And five years ago you had never heard the name AirTouch. That suggests to
me that there is a revolution going on in our industry."
The new company, to be called Vodafone AirTouch PLC, would have an
estimated market capitalization of more than $110 billion and annual revenue of
$9.9 billion. It will aim, the companies said, to become the "Coca-Cola" of
global wireless communications and the main brand recognized by consumers
world-wide.
Vodafone outbid Bell Atlantic Corp., which withdrew an offer of about $45
billion for AirTouch on Friday, paving the way for Vodafone and AirTouch to
make a deal.
Completing 'Footprint'
Without Bell Atlantic, however, AirTouch still lacks national coverage in the
U.S. But Mr. Ginn repeated that he still hopes to complete the company's
nationwide "footprint" through the PrimeCo joint venture it shares with Bell
Atlantic, its own properties or buying more licenses.
Bell Atlantic and AirTouch have a noncompete clause in their PrimeCo
contract, but Bell Atlantic has filed suit to void the agreement. Given the
pending lawsuit, Mr. Ginn said the companies will go back into negotiations
over U.S. markets. "It is in everyone's interests for that to happen. We have a
symbiotic relationship with Bell Atlantic," he said.
Meanwhile, the chief executives of the two companies also said at a London
news conference that they had already begun talks to sell Vodafone's 17%
stake in Germany's E-Plus Mobilfunk GmbH and hope instead to raise
AirTouch's 35% stake in the more successful Mannesmann Mobilfunk GmbH.
"E-Plus is a good business, but Mannesmann is outstanding," said Chris Gent,
Vodafone's chief executive, who has been designated head of the new
company.
New Acquisitions
The two companies also said that they plan to raise their holdings in
mobile-phone businesses to obtain control in as many of the 23 countries they
operate in as possible. The next step, Mr. Gent said, will be to make new
acquisitions and bid for new licenses. He declined to put a dollar figure on new
acquisitions but said they would be financed out of cash resources.
Ken Hydon, Vodafone's finance director, said digesting the takeover will mean
taking an annual charge of between $2 billion and $2.5 billion and that the new
company won't post pretax profit for another three years. That's because of an
estimated $32 billion in goodwill amortization. Total debt will be about $7.5
billion by March 2000.
On the London Stock Exchange Monday, Vodafone stock jumped 1.57 British
pounds ($2.59) to 12.255 pounds.
Lack of Standard
The new company will be one of the first truly global wireless enterprises. But
the lack of a single wireless standard remains an obstacle to offering services
that allow customers to be reached on one phone number anywhere in the
world.
There is a move afoot to use development of the next generation of mobile
communications, which will make it possible for mobile-phone networks to
offer fast Internet access and mulitmedia services, to create just such a global
standard. But the U.S. and Europe are at loggerheads over its development.
Europe is championing a third-generation digital mobile-phone system called
WCDMA, largely developed by Telefon AB L.M. Ericsson of Sweden. But
Qualcomm Inc. of the U.S. claims the intellectual property rights for the
technology.
While Qualcomm has successfully licensed its own version world-wide under
the name CDMA, it has been effectively shut out of the lucrative European
marketplace with the argument that European service providers and consumers
don't want to support two incompatible cellular-phone technologies.
March 31 Deadline
The battle will heat up in the coming weeks as the U.S. and European Union
press their cases before the International Telecommunications Union of the
United Nations, which has set a March 31 deadline for making a decision on
which system to use world-wide. People in the industry increasingly expect a
messy compromise in which the ITU will back a family of standards rather
than just one.
Commenting on the dispute, Mr. Ginn of AirTouch notes that it is this sort of
squabbling that Vodafone AirTouch hopes to resolve and pledges the new
company will lobby hard to prevent the disagreement from blocking creation of
a global mobile-phone standard.
"The solution is pretty obvious: allow the next generation to have a single world
standard," he says. "The consumer has been lost in the current debate. We will
put as much pressure as we can on the ITU to seize this wonderful opportunity
to harmonize technological standards."
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