AT&T rules out bid for Vodafone, but speculation continues

AT&T (NYSE:T) said it does not intend to make a takeover offer for U.K.-based carrier Vodafone, quashing months of speculation that AT&T might make a move on the operator.

In a statement, AT&T said it was responding to speculation regarding a potential deal after the U.K. Takeover Panel asked AT&T to clarify its position. Under the rules of the panel, the statement means AT&T can't offer to buy Vodafone or a stake of 30 percent or more in the company for the next six months.

In November, Bloomberg reported AT&T was exploring plans for a potential takeover of Vodafone sometime in 2014. The report, citing unnamed sources, said while the companies had not started any formal negotiations, AT&T was sharpening its focus internally on which Vodafone assets it would keep after a deal and who could buy others.

Verizon Communications' (NYSE:VZ) $130 billion deal to acquire Vodafone's 45 percent stake in Verizon Wireless is expected to close next month. That deal sparked speculation about AT&T making a move on Vodafone.

AT&T has made no secret of its interest in Europe. AT&T CEO Randall Stephenson in October said that he continues to be fascinated by how slow mobile broadband is moving in Europe and therefore he thinks it is "a huge opportunity for somebody." In September he said "if there were opportunities that presented a good value, of course we would do it."

Stephenson reportedly reiterated his interest in broadening investment and operations in Europe at a dinner last Tuesday night with the European Union's top telecom regulator, Neelie Kroes, according to a Wall Street Journal report, which cited unnamed sources familiar with the conversation. There was no discussion of specific deals or targets for AT&T, the report said.

Simon Weeden, an analyst at Citigroup in London, wrote in a note to clients that the move could mean AT&T might forge a transaction with Vodafone later. "The move could indicate that AT&T is either uninterested altogether or merely unprepared to start a process today given time constraints," he wrote, according to Bloomberg.

Analysts have argued AT&T would face an array of challenges in Europe in a deal with Vodafone, including fragmented regulatory regimes, price-sensitive markets and not enough economies of scale to make a major deal worthwhile.

An unnamed European telecommunications executive with knowledge of the matter told the Journal there was strong speculation last week that AT&T was continuing to explore the regulatory, legal and financial details surrounding a potential bid for Vodafone. "The AT&T statement has further fueled the talk that it plans a bid for Vodafone in the second half of the year," the executive said.

For more:
- see this AT&T release
- see this WSJ article (sub. req.)
- see this Bloomberg article
- see this Reuters article

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