Sunday January 10, 5:13 pm Eastern Time
(Note: this article is ''in progress''; there will likely be an update soon.)
AirTouch saga seen starting busy year of mergers
By Jessica Hall
NEW YORK, Jan 10 (Reuters) - The intense takeover interest in AirTouch Communications Inc. (NYSE:ATI - news), the world's largest independent wireless company, started what is expected to be another frenzied year of consolidation in the telecommunications industry, Wall Street analysts said.
MCI WorldCom Inc. the No. 2 U.S. long distance company, on Friday backed away from making an offer for AirTouch, leaving Bell Atlantic Corp. (NYSE:BEL - news), the No. 1 U.S. local phone company, and Vodafone Group Plc (quote from Yahoo! UK & Ireland: VOD.L), Britain's largest wireless telecommunications company, in the race.
AirTouch, beyond acknowledging that it is in talks with the two companies, has remained nearly silent through its courtship.
Expectations the interest in AirTouch could spread to other wireless companies sent stock prices of several U.S. and European telecommunications higher, including Virginia-based Nextel Communications Inc. (Nasdaq:NXTL - news) and U.K cellular operator Orange Plc (quote from Yahoo! UK & Ireland: ORA.L).
Shares of Nextel gained nearly 26 percent last week, while Orange's stock jumped 36 percent.
Meanwhile, shares of Cable and Wireless Plc, Britain's second-largest telecommunications company (quote from Yahoo! UK & Ireland: CW.L), jumped almost 10 percent on Friday amid market rumors it may be acquired by German phone giant Deutsche Telekom AG (quote from Yahoo! UK & Ireland: DTEG.F). Both companies declined to comment.
The U.K.'s Colt Telecom Group Inc. (quote from Yahoo! UK & Ireland: CTM.L), a fast-growing owner of 12 European city networks, is also seen as potential takeover target, analysts said.
European telecommunications companies could see a wave of merger activity as players search for partners to battle competition in the post-derugulation era. The former monopolists are searching for ways to offset the erosion of their marketshare, while start-ups are looking for fast ways to amass bulk, analysts said.
Even AirTouch suitor, Vodafone, could find itself a takeover target, some analysts said.
''Everyone is eyeing everyone else. Once you put your name out there as a buyer or a seller, everyone starts taking a look ... the hunter could easily become the hunter,'' said one analyst who declined to be named.
The U.S. telecommunications carriers are also expected to see continued consolidation, on top of last year's $183 billion in major deals, as companies look to round out their product mix and buy services they currently lack.
Phone companies will likely look to bolster their data and Internet services through acquisitions of Internet service providers or companies building national, data networks, such as Qwest Communications International Inc. (Nasdaq:QWST - news) and Level 3 Communications Inc. (Nasdaq:LVLT - news), industry analysts said.
AT&T Corp. (NYSE:T - news), which last fall announced the acquisition of wireless carrier Vanguard Cellular Systems Inc. (Nasdaq:VCELA - news), is also expected to more wireless companies this year to fill in gaps in its national network, they said.
Links with Asian companies such as Nippon Telegraph and Telephone Corp. may also develop as U.S. and European companies search to form truly global networks to handle the needs of multinational companies and increasingly mobile consumers.
The AirTouch takeover saga, meanwhile, is expected to linger for days, if not weeks, as the San Francisco-based company mulls its current merger proposals and waits for potentially more.
Bell Atlantic's offer is valued at about $45 billion, while Vodafone is bidding $55 billion, according to media reports.
Bell Atlantic continued to work with AirTouch to resolve the complex accounting treatment of a potential deal, sources familiar with Bell Atlantic's stragegy say.
Vodafone executives met last week in New York with AirTouch officials. Vodafone's negotiating team on Monday is set to brief Vodafone Chief Executive Chris Gent, who has been traveling in Australia and New Zealand, on the status of talks.
Other potential AirTouch bidders may emerge. Atlanta-based BellSouth Corp. (NYSE:BLS - news) and Germany's Mannesmann AG (quote from Yahoo! UK & Ireland: MMWG.F) have been rumored as potential AirTouch suitors, industry analysts said.
BellSouth has declined to comment, while a Mannesmann spokesman said last week the company had no plans to bid for AirTouch.
British Telecommunications Plc (quote from Yahoo! UK & Ireland: BT.L) on Sunday described as ''pure rumor'' a report that it might join the battle for AirTouch.
Britain's Sunday Times, quoting Wall Street investment bankers, reported that BT had notified AirTouch adviser Morgan Stanley last week of its interest. But a spokesman for Britain's largest telecoms carrier said the report was ''pure rumor and speculation''.
AirTouch has been virtually mum over the past 10 days, making no indication of whether it would open itself to an auction or solicit additional bids to ensure its shareholders would get the best possible value.
Last week, several AirTouch shareholders filed suits against the company, demanding AirTouch directors take steps to maximize the value AirTouch shareholders may receive.
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