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US megalocorp AT&T: We're NOT swallowing Blighty's Vodafone

Does that make T-Mobile a target?

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+Analysis Speculation that AT&T was shopping for Vodafone as an entry into the European market has been brought to an end after an exec ruled it out.

At the request of the Takeover Panel, the independent body which regulates the city of London code on takeovers, AT&T has said that it will not pursue Vodafone. The takeover panel refused to be drawn on the specific subject of approaching AT&T but said it looks to provide market stability when there is significant speculation.

The announcement precludes a takeover of the company for at least six months. There had been wide speculation that on the back of Vodafone having divested itself of its share in Verizon – which would have been a regulatory problem for the American operator – AT&T would therefore be free to buy Vodafone.

You might remember that German operator Mannesmann bought Orange in the UK in a bid to block a Vodafone takeover – and found itself out-manoeuvred in 1999 when Vodafone slurped Mannesmann itself along with Orange, which it was forced to spit out (it had to "divest itself" of the brand, selling it off to current owner France Télécom so the EU would approve the deal).

Analysis

But this poison-pill strategy might work for Vodafone if it wanted to ensure protection from AT&T by buying T-Mobile US. It's financially difficult for Vodafone to justify absorbing the third player in the US but it would give them the control they never enjoyed with Verizon – and of course the sale has made them fabulously cash-rich.

Vodafone taking on T-Mobile US would then make T-Mobile in Europe much more attractive to AT&T in the musical chairs that is the mobile phone business. Industry expert Nick Foggin believes that AT&T is only interested in a big takeover to expand its interests outside the US.

While the takeover panel announcement wouldn't stop Vodafone from selling individual territories to AT&T, this would not suit either of them. Vodafone may be more interested in the growing developing world, but it has yet to turn this interest into valuable companies.

The European countries AT&T would be interested in are too much of a cash cow for Vodafone. The removal of a major player like T-Mobile would suit the stock market investors who generally see consolidation as A Good Thing and would help justify the value of a premium sale.

A Vodafone takeover would also pose some interesting challenges – not least from the unionisation of T-Mobile and the German government having a stake. ®

The smart choice: opportunity from uncertainty

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