Vodafone under fire over £18bn ‘bid’

SHARES in British mobile phone giant Vodafone fell more than 3% yesterday after the City came out against a mooted £18 billion expansion in North America.

Fund managers warned they would downgrade Vodafone if it succeeded in a bidding war for US operator AT&T Wireless also a target of rival Cingular.

The hard-line stance was based on fears that the Newbury-based group would be forced into overpaying for AT&T in an auction process that could drag on until February 29.

It also underlined concerns that Vodafone would have to give up a profitable stake in US firm Verizon Wireless for a company whose fourth-quarter results showed profits declining 89% year-on-year.

Analysts said the "poker tactics" of the company in refusing to confirm officially that it had made a bid also risked alienating investors.

City stockbroker Dresdner Kleinwort Wasserstein said it was "disappointed and annoyed" at the bid speculation that has pushed the share price down nearly 10% in two weeks.

It told investors: "We don't approve of this US deal as the benefits are tenuous, the asset quality low and the price is too high in our view."

Cingular would generate cost savings from overlaps with its existing business.

But analysts said Vodafone was unlikely to generate savings on a similar scale and was pursuing a bid because it wanted direct control of a US operator rather than a minority stake.

Telecoms expert Christian Maher, of stockbrokers Investec, said he feared the bid process for the third largest operator in the US could drag on.

Speculation was growing in the City that Vodafone would lift its offer to 38 billion US dollars (£20.1bn) a price that Cingular was expected to match.

Mr Maher said a successful bid by Vodafone could force him to cut forecasts if it was coupled with the disposal of the Verizon stake at a bargain rate.

The fall in Vodafone shares wiped more than 10 points off the value of the FTSE 100 Index today, driving it into negative territory.

Geoff Langham, head of trading at CMC Group, said the share price was being supported by competition from Cingular.

"But should Cingular pull out of the race, Vodafone's share price will be under pressure, pushing the FTSE lower as a result," he said.