Vodafone confirms pounds 60bn merger talks with US rival
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Your support makes all the difference.VODAFONE, the mobile phone supplier, yesterday confirmed it is in talks with US rival AirTouch about a merger which would create an industry giant with more than 20 million customers and a market value of over pounds 60bn.
Vodafone yesterday approached AirTouch with a suggestion that the two companies combine in a full merger. AirTouch said it was considering the proposal, but both companies stressed there could be "no assurance" that any agreement would be reached.
AirTouch, based in San Francisco, is also still negotiating with Bell Atlantic, the acquisitive US regional telecoms group. Discussions are believed to be going on with both groups.
Vodafone is reported to have tabled a proposal which would value AirTouch at about $45bn - a small premium to the $42bn reportedly offered by Bell Atlantic. Shares in AirTouch jumped $5.5 to $75.75 yesterday, putting the group's market value at $42bn.
Vodafone did not comment on the sum it has offered. But it is understood that details of the merger, such as the division of senior management positions, have yet to be decided. The company is believed to have retained Goldman Sachs, the US investment bank, as adviser.
Any merger would require Vodafone to issue shares roughly equivalent to its own market value. If it was listed in London, the combined entity would rival British Telecom as the UK's largest telecoms company.
Chris Gent, Vodafone's chief executive, was last night believed to be preparing to return to the UK from Australia, where he has been watching the England cricket team.
Analysts had suggested that Vodafone might only offer for AirTouch's overseas businesses, leaving Bell Atlantic to take control of the US operations. But the UK company is understood not to have had any discussions with Bell Atlantic about a joint bid.
Vodafone and AirTouch have long been seen as ideal merger partners, and they held talks as recently as 1997. However, any deal has always foundered on valuations.
Industry observers stressed the benefits of a merger. "Huge parts of both these businesses are still at very immature stages," said SG Securities analyst John Tysoe, referring to the companies' policy of investing in new mobile phone operators around the world. "There is enormous scope for cost benefits by being in multiple worldwide markets."
In previous talks Vodafone and AirTouch calculated that they could save between 6 and 7 per cent of their combined revenues in Europe. They would enjoy huge purchasing synergies in network equipment and mobile phone handsets and could share IT skills.
Both have pursued a strategy of investing in start-up mobile networks in continental Europe. However, as they were frequently members of rival consortia, the fit between operations is almost perfect. The only overlap is in Germany, where they have stakes in rival networks. However, they are partners in Sweden and Egypt.
Vodafone's offer may be helped by the close contact the management teams have enjoyed. Sam Ginn, AirTouch chairman, has great respect for Mr Gent, raising hopes that the AirTouch board will favour Vodafone. "It will be the management, rather than the price, that will ultimately decide who wins this deal," an expert said.
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