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Vodafone leans towards AT&T Wireless bid

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UK-based mobile operator Vodafone Group is reportedly leaning toward a bid for number three US mobile operator AT&T Wireless.

That's according to several newspaper reports on Monday, reinforcing earlier speculation that the British giant is eyeing up the American company which put itself up for sale in late January. However, two main factors could complicate the UK-based company's bid - shareholder resistance and an existing alliance with AT&T Wireless rival Verizon Wireless.

For its part, Vodafone has so far declined to officially throw its hat into the ring. "Vodafone Group plc announces that it continues to monitor developments in the US market and is exploring whether a potential transaction with AT&T Wireless is in the interests of its shareholders," the company said in a brief statement on Monday morning.

If, however, the company does press forward with an acquisition proposal, which Vodafone CEO Arun Sarin is allegedly in favour of, it would make for the firm's biggest buy since its now-controversial purchase of German operator Mannesmann in 1999, a deal worth roughly €70bn.

Vodafone currently owns about 45 per cent of Verizon Wireless, which the UK company would sell to Verizon Communication in the event of a takeover of AT&T Wireless. That minority shareholding in Verizon could bring in as much as $20bn or more, analysts say.

Meanwhile, AT&T Wireless is pegged to sell for up to $35bn. Friday, 13 February, is the deadline set for proposals to be delivered to the company's board. Already SBC Communications' wireless arm, Cingular Wireless, has offered $30bn, or about $11 per share, in an all-cash bid for AT&T Wireless. Bell South has also expressed interest in making a bid for the company.

With less than a week to go before bids are due, analysts are also watching to see if fifth-ranked US operator Nextel Communications, Deutsche Telekom-owned sixth-ranked player T-Mobile USA or NTT DoCoMo will make a move for AT&T Wireless. DoCoMo already owns about 16 per cent of AT&T Wireless.

Resistance among shareholders could also hamper Vodafone's ambitions to buy AT&T Wireless. In the days after speculation began that Vodafone could enter the race, its shares sank from $27.20 to $24.43, as investors questioned the wisdom of such a large outlay of cash for a number three carrier. Traditionally, Vodafone has opted to buy a number one or number two player in new markets. Verizon, the top US carrier, has about 34.6 million subscribers, compared to around 22 million for AT&T Wireless.

On Friday, 6 February, Vodafone shares climbed nearly 4 per cent in New York to close at $25.37.

© ENN

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