Britain's Vodafone and U.S. rival
Bell Atlantic look set to raise their multibillion dollar bids
as they fight for AirTouch, the world's biggest wireless
telecoms company, analysts said on Friday.
Reports on both sides of the Atlantic said Vodafone and Bell
are poised to increase their bids from an expected $55 billion
and $48 billion, respectively.
The Financial Times newspaper said Vodafone was considering
raising its offer after U.S. local phone titan Bell Atlantic was
quoted as saying it aims to beat its British rival's bid.
Bell could potentially up the ante thanks to a U.S.
regulatory decision allowing it to use a favorable accounting
method for the AirTouch deal, sources familiar with the
situation told Reuters in New York.
But Vodafone, Britain's largest mobile company, is likely to
respond to any challenge, given that AirTouch is seen as a
one-off opportunity to create a global powerhouse in the
lucrative area of mobile telephony, analysts say.
"If you want to be the wireless Coca-Cola, there aren't
many other acquisitions you could make like AirTouch," said ABN
AMRO analyst Alan Lyons, who has a 'hold' rating on Vodafone
pending the outcome of the deal.
This perceived "scarcity value" could drive AirTouch's
price well beyond the Vodafone's reported $55 billion bid,
consisting of some $90 a share in stock and $4-$6 per share in
"We reckon AirTouch is worth $100 a share in its own
right," one analyst said. "And for Vodafone, because of the
strategic benefits and synergistic benefits, it's worth a lot
more than $100. So you could see them quite comfortably paying
more and people still realizing its a good deal for them."
At this point, though, estimating AirTouch's price tag is
complicated by the fact that neither suitor has actually
confirmed how much it has bid, leading at least one punning
pundit to dub the AirTouch saga as a "phoney war."
Vodafone declined to comment on the latest report,
reiterating that it is still waiting to hear from AirTouch,
which has also stayed silent as it weighs up the offers.
"The ball is in their court," a Vodafone spokesman said.
Vodafone's shares, which have more than doubled in the past
three months, firmed 0.5 percent, or 5.5 pence to trade at 1057
by 1330 GMT. Bell's shares closed down about $1 at $53-13/16 in
New York on Thursday amid an overall drop in the U.S. market.
One of the key issues for either suitor will be the
accounting treatment of any deal.
The Financial Times said Vodafone is considering structuring
an AirTouch deal as an acquisition rather than a merger, meaning
that it would have to amortise goodwill against earnings.
As a result, the acquisition would substantially dilute
Vodafone's reported earnings in the short term, a situation that
investors might not like but would probably learn to live with,
depending on the structure of the deal.
"It's not a deal-killer, but it's certainly a big speed
bump," an analyst said.
Meanwhile, Bell Atlantic has received a regulatory
ruling allowing it to use pooling-of-interest accounting for an
AirTouch deal, meaning that it could potentially avoid certain
charges that might dampen profits.
For Bell, AirTouch offers a position in the western U.S.,
allowing the Baby Bell to break out of its confined East Coast
market that is dwarfed by nationwide providers such as AT&T; Corp
and Sprint PCS.
For Vodafone, AirTouch represents a strong fit
internationally, with Vodafone's northern European assets
meshing well with AirTouch's operations in the south.
AirTouch would also give Vodafone a market position in the
U.S., a market it has shied away from in the past.