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Technology Stocks : Vodafone-Airtouch (NYSE: VOD) -- Ignore unavailable to you. Want to Upgrade?

To: MrGreenJeans who wrote (2012)	10/19/1999 10:25:00 PM
From: MrGreenJeans	Read Replies (1) \| Respond to of 3175

Peeling Orange Financial Times Mannesmann's move on Orange looks defensive. Vodafone Airtouch has been stalking the German group for months. If Mannesmann now snaps up Orange, that would act as a poison pill. Vodafone would not be able to own two mobile networks in the UK; so any bid for Mannesmann would be followed by a big disposal. This is not to say that adding Orange to Mannesmann's mobile networks in Germany, Italy and France lacks industrial logic. There could be big commercial advantages in owning a seamless pan-European network. Indeed, it is for this reason that Vodafone is so keen on acquiring Mannesmann. But Mannesmann looks as though it is going to have to pay a high price for the privilege. Orange's market capitalisation is over œ16bn. Adding in its debt and stripping out the value of its international operations gives an implied enterprise value for its UK network of over œ17bn. That is roughly twice the œ8.4bn Deutsche Telekom paid for One-2-One, another UK mobile network, in August; it is also double the implied value that France Telecom has put on E-Plus, Germany's third mobile network. Any premium to the current share price would stretch these comparisons further. On a price per subscriber basis, Orange is also extremely expensive. Although Mannesmann's stock is highly valued compared with industrial groups, it is cheap by comparison with Orange. Since the German group would presumably fund a deal mainly with its own paper, its shareholders could be severely diluted. All this puts Vodafone in a dilemma. If it allows Mannesmann to clinch Orange, it could find its best opportunity in continental Europe blocked. The bold move would be to bid for Mannesmann and then ditch the Orange deal. Unfortunately, hostile bids are expensive and hard to mount in Germany. Alternatively, Vodafone could bide its time in the hope that Mannesmann's investors give the Orange deal the thumbs down by selling the German group's stock. If Mannesmann's share price falls any further, Vodafone could then lob in a bid with a greater chance of success. The snag with such a wait-and-see strategy is that Vodafone could then lose control of events.