AT&T is reported to be going ahead with preparing a bid for Vodafone, despite complications introduced by the US NSA spying scandal.
The Wall Street Journal reported last week that the fury of many European governments about revelations of extensive US spying would throw a spanner in the works of a Vodafone/AT&T deal, because of the US carrier’s involvement in collecting and recording call data ‘ as suggested by the revelations of whistle blower Edward Snowden.
Nevertheless, AT&T could still aim for a Vodafone takeover as early as next year, once the UK-based giant has completed its exit from its Verizon Wireless US joint venture. This will remove the competitive complications of a deal for AT&T, but even notwithstanding the Snowden affair, it would be a highly complex transaction.
According to the WSJ, no formal negotiations have taken place between the carriers, but AT&T executives are already examining which Vodafone assets it would retain and which it might sell on. It is understood to be mainly interested in the European firm’s mobile assets and would be likely to downplay its efforts to expand its wireline and quad play activities, as seen in the recent purchase of Germany’s Kabel Deutschland.
The US firm is also said to be less interested than Vodafone in expansion in emerging markets. Increasing stakes, or buying new partners, in parts of Africa and Asia is an important element of CEO Vittorio Colao’s recovery strategy. One theory is that the emerging market assets could be spun off into a separate entity by AT&T and sold on to another expansionist operator such as France Telecom, America Movil or China Mobile.
AT&T – whose CEO Randall Stephenson recently called on the European Union to relax the regulatory environment to encourage investment and faster mobile broadband progress ‘ is also said to consider the UK’s largest cellco, EE, as an alternative target should Vodafone prove hostile or too expensive. EE is a joint venture of France Telecom and Deutsche Telekom but both parents are said to be open to the idea of selling their stakes.
If AT&T and Vodafone did merge, they would create the world’s largest telco by sales with a market capitalization of about $250bn, and AT&T would make its move at a time when its share price is strong while European companies’ values are under pressure from the recession. AT&T is reported to have mooted a deal to Verizon, which would have seen AT&T buying Vodafone’s European operations, Verizon buying out the US JV, and America Movil acquiring most of the rest. Verizon apparently rejected the idea as being too complicated and likely to slow down its takeover of Verizon Wireless.