AT&T rules out bid for Vodafone

US mobile group AT&T has ruled out a bid for Britain’s Vodafone for now, with banking sources saying a US spying scandal and a surge in European telecom shares may have disrupted a deal that many think could still happen.

AT&T, the US’s second- largest mobile operator, sparked speculation it could be interested in a potentially £70bn-plus (€84bn) deal for Vodafone after its chief executive said in October there was a “huge opportunity” in Europe to invest in mobile broadband.

However, after weekend news reports it had met European regulators to sound them out about a deal, AT&T was asked by Britain’s takeover watchdog to clarify its position and said in a statement yesterday it did not intend to make a bid.

The statement means AT&T cannot make an offer for at least six months, unless Vodafone invites it to do so or a third party enters the fray. Vodafone’s shares fell as much as 7%.

Analysts said the clarification could provide a reality check for the wider European telecoms sector, which has surged about 24% in value over the past year compared with an 11% rise in Europe’s top share index. The sector has been lifted by a string of takeover deals, despite few signs of an improvement in underlying trading.

But analysts also said a deal could still make sense for AT&T. The US group is facing a more competitive home market and may be attracted by a European market which many think could soon benefit from economic recovery and the sort of growth in superfast 4G broadband seen in the US.

One banker hoping to advise AT&T on any future Vodafone bid told Reuters the British group, which is in the process of selling out of a US joint venture, remained the perfect partner for AT&T because of its presence across Europe.

AT&T was simply not ready to make an offer, the banker said, adding matters had been complicated by the discovery of a mass spying programme by the US National Security Agency, which has sparked outrage in Europe.

Another sector banker said a recent surge in Vodafone’s share price due to the US sale and speculation of a takeover bid might also have deterred AT&T. Vodafone shares are up 38% over the past year.

Before any bid, AT&T would have to win over its shareholders, some of whom have questioned the wisdom of entering markets such as Britain, Germany, and Spain where fierce competition has combined with unpredictable regulation to hit telecoms firm’s earnings and prospects.

Another complication for AT&T is that it is unlikely to want to run Vodafone’s businesses in emerging markets such as India, South Africa and Turkey, which were hit last week by a sell off in their currencies.

— Reuters