Vodafone Group Plc (VOD) rose as much as 6.1 percent in London trading after a Financial Times blog reported that AT&T Inc. (T) and Verizon Communications Inc. (VZ) may jointly bid for the British mobile-phone company.
Verizon, which co-owns Verizon Wireless with Vodafone in the U.S., and AT&T have been working on putting together a breakup bid for Vodafone and could potentially offer 260 pence ($3.93) per share, the FT Alphaville blog said today, citing “usually reliable people” it didn’t name.
Discussions on how to resolve Vodafone’s stake in its Verizon Wireless joint venture -- formed in 1999 when Bell Atlantic Corp., which became Verizon Communications, and Vodafone joined their mobile units -- have been going on for years without a solution. Verizon is working on how to resolve its partnership with Vodafone this year to gain full control over its most valuable asset, and has considered a full merger, people familiar with the situation told Bloomberg last month.
Shares of Vodafone, the world’s second-largest wireless service provider behind China Mobile Ltd. (941), closed up 2.9 percent at 192 pence after rising as much as 6.1 percent in London trading.
While AT&T may be interested in Europe, “AT&T historically has been a relatively acute buyer,” Robin Bienenstock, a Sanford C. Bernstein analyst in London, said in a telephone interview today. “If you look at what they’ve bought in U.S. acquisitions, they’ve always bought at quite low prices.”
In a full merger, Verizon could sell Vodafone’s international assets to AT&T for a premium, analysts have said. Still, the deal would be unusually expensive and complicated for Dallas-based AT&T, Bienenstock said in an interview.
Vodafone, Verizon and AT&T spokesmen declined to comment on reports about talks among the companies.
Puts protecting against a 10 percent decline in Vodafone stock cost 0.7 points more than calls betting on a 10 percent rally, according to six-month data compiled by Bloomberg. That difference, which indicates the cost of hedging against losses, has fallen to the lowest level in more than four years as investors bet the company will sell its Verizon Wireless stake.
AT&T wireless head Ralph de la Vega said in an interview in February that the company looks at expansion opportunities internationally.
The U.S. and U.K. mobile-phone operators discussed a full combination as recently as December, people familiar with the situation told Bloomberg last month. Those talks stumbled over disagreements on leadership and the location of the new headquarters, making a buyout or partial sale of Vodafone’s 45 percent stake in the Verizon Wireless subsidiary a likelier outcome, the people said. That stake is worth about $115 billion, according to analysts.
Vodafone is looking for ways to add scale as it grapples with declining service revenue amid a slowdown in Europe, its biggest market. Chief Executive Officer Vittorio Colao has said he wants to add assets that would allow the company to offer bundled Internet, mobile and fixed-line phone services across the continent. The company had internal discussions about an acquisition of German cable company Kabel Deutschland Holding AG (KD8) before abandoning the approach plans, people familiar with the plans said.
In 2004, former Verizon Communications CEO Ivan Seidenberg suggested that Vodafone and Verizon Communications swap a stake in Vodafone’s Italian business for Vodafone’s holding in the U.S. In 2006, analysts called for Vodafone to take advantage of an option to sell $20 billion of its holding in Verizon Wireless to Verizon Communications. The company let that option expire in 2007.
It came up again in 2009, when Colao, on the job for just over a year, said at a conference in Barcelona that he intended to “solve” Vodafone’s lack of control over Verizon Wireless and that he would consider selling the stake or merging with Verizon Communications.
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