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at&t considering purchasing vodafone??


richy

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http://www.bloomberg.com/news/2013-10-31/at-t-is-said-to-explore-vodafone-takeover-as-soon-as-next-year.html

 

Not sure this would fly, using similar metrics to the vzw \ vodafone sale AT&T would need to find at least $360bn. That is a lot of wonga to find, and thats if theres a deal to be had. AT&T are probably big enough to pull it off and it would make some sense, but they would be hugely in the hock on this deal. Borrowing is cheap right now, but that is a LOT of borrowing by anyones standards. 

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I somehow doubt that it'll cost T $360B to buy Vodafone. Maybe half of that seems more likely imo.

 

I welcome that though. Maybe if they're spending a pretty penny on Voda, they won't be interested in gobbling up anymore carriers here in the US...not that there's a whole lot left for them to absorb.

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If only Vodafone could have gotten AT&TWS, instead of Cingular winning that early morning bidding war back in 2004, I wonder how the domestic wireless industry would be different today...

 

AJ

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If only Vodafone could have gotten AT&TWS, instead of Cingular winning that early morning bidding war back in 2004, I wonder how the domestic wireless industry would be different today...

 

AJ

I think that Cingular and T-Mobile would have been an item.

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I somehow doubt that it'll cost T $360B to buy Vodafone. Maybe half of that seems more likely imo.

 

I welcome that though. Maybe if they're spending a pretty penny on Voda, they won't be interested in gobbling up anymore carriers here in the US...not that there's a whole lot left for them to absorb.

 

I think it's highly unlikely that Vodafone shareholders would sell for less that the market value of their shares as you suggest. The market cap is ~$180bn. It pulls in about $18bn a year operating revenue off $70bn revenue (converting from GBP in my head so sorry if theres errors). Verizon just bought out a 45% stake in itself (market cap of $144bn) for $130bn which is near enough a 100% premium. I just applied a similar premium to vodafone :) 

 

I would guess that there is the potential for a merger but a sale would be less messy regulation wise (especially with the german arm of voda) and it would be offered as cash plus shares. They would have to pay a handsome premium over the market cap because it is a healthy profitable company that is growing. Why sell your shares at book price when they will grow each year and return a healthy dividend (and special dividends at the moment given their scrooge mc duck pile of vzw cash)? :) I'm not having a go at you, just explaining where that number came from and why I believe it isn't as crazy as it sounds, Depending on what metric you choose, Voda is about the same size if not a little larger than Vzw and just as healthy. That will take one huge chunk of money to buy. 

 

I at&t want more reach they might get better value for their money buying smaller companies or 'tier 1.5' competitors (especially given the potential with upcoming auctions) and putting cash in themselves. Buying voda is buying a completed product and you are paying someone else for having done the work to get into 1st place.

 

Given the current issues with the NSA I wonder how that will affect the purchase, especially with the French and German subsidiaries. 

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I think it's highly unlikely that Vodafone shareholders would sell for less that the market value of their shares as you suggest. The market cap is ~$180bn. It pulls in about $18bn a year operating revenue off $70bn revenue (converting from GBP in my head so sorry if theres errors). Verizon just bought out a 45% stake in itself (market cap of $144bn) for $130bn which is near enough a 100% premium. I just applied a similar premium to vodafone :)

 

Well perhaps somewhere in the middle. I read somewhere that the combined company could be worth $250B. I kinda doubt that T would spend $360B just to wind up with a $250B company.  :D

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Well perhaps somewhere in the middle. I read somewhere that the combined company could be worth $250B. I kinda doubt that T would spend $360B just to wind up with a $250B company.  :D

 

I get what you are saying but the figures are way off. AT&T has a market cap of $190Bn and Voda has a market cap of about $170Bn, so combined it would be $360Bn. So your point (and it's a valid question with a sensible answer) is why would AT&T pay $360Bn to turn a $190Bn company into a $360Bn company, why not just keep the money and party like it's 1999. To understand it you have to flip it on it's head. Why would a Vodafone shareholder sell a share that is work X and will also pay them Y a year and appreciate in value by Z a year. If Voda was say Tmobile or Virgin Media or some company with the potential to eat money and not return any you would have an excellent point, however Voda is stronger than Mr T on angel dust.

 

To make it worthwhile, to tempt a Vodafone customer to sell their shares they have to overpay the face value, just like Verizon had to do to buy back the 45% of itself that Vodafone paid (vzw paid a 100% premium, they paid $130Bn to buy ~$65Bn in shares). This 'premium' is difficult to calculate in advance, my personal guess is that there will be a large cash contingent (from reserves and additional bond issues) and shares in at&t. I think cash alone would be too much to easily raise, and all shares would not be attractive enough and may also leave them contravening covenants on their existing borrowing. Don't get me wrong, I totally understand why it would seem crazy to spend twice what something is worth to buy it, but it is worth more than the face value. 

 

Personally I neither like the concept of at&t buying Voda, nor do I think it is particularly wise as a business move. This kinda of smells like a CEO trying to hit an insane bonus payout or get a nicer jet. A merger might make more sense, but a buyout would be so highly leveraged that even a cash and asset rich company like at&t would find themselves straining, pushing up prices all round and leaving them less competitive. Then again, I don't own a cellco lol. 

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