AT&T's share repurchase could make a Vodafone deal less likely

AT&T's (NYSE:T) announcement Monday that it will repurchase 300 million shares, or about 6 percent of its outstanding stock, could further cool speculation that the carrier is interested in making a bid for Vodafone.

The buyback of the shares, worth close to $11 billion, makes it less likely that AT&T will splurge on any new acquisitions, especially abroad. At home the carrier has said it is focused on finishing its LTE buildout and using the Cricket prepaid brand it acquired from Leap Wireless to move more aggressively into the prepaid market.

AT&T has bought back 775 million shares since 2012, but as the New York Times notes, the latest purchase reinforces the idea that a Vodafone deal has grown less attractive over time. Although AT&T had $3.4 billion in cash and short-term investments on hand at the end of 2013, it also has promised to keep its debt level at about 1.8 times adjusted EBITDA, making a huge purchase with lots of debt less likely.

Further, in March Vodafone said it would pay $10 billion to buy Spanish cable operator Ono, an indication that it is doubling down on its own European expansion following Verizon Communications' (NYSE:VZ) $130 billion deal to acquire Vodafone's 45 percent stake in Verizon Wireless. The Ono deal was Vodafone's first major transaction since the Verizon deal closed in February. Vodafone struck a similar $10.7 billion deal for German cable operator Kabel Deutschland last year.

Vodafone's Ono purchase will give it assets that AT&T likely is not that interested in, according to analysts.

AT&T has been giving signals that it wants to keep its interests closer to home. AT&T CFO John Stephens said at an investor conference in March that the company is now more squarely focused on the U.S. market--instead of Europe--than it was six months or a year ago. "We see the window of opportunity on owning assets there [in Europe] may be closing," he said.

"Things have changed," Stephens said, pointing to AT&T's focus on its Project VIP network rollouts of LTE and U-verse TV in the U.S., LTE rollouts in Europe and Comcast's bid to merge with Time Warner Cable.

In late January, AT&T said it did not intend to make a takeover offer for Vodafone. In a statement then, 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 meant AT&T cannot offer to buy Vodafone or a stake of 30 percent or more in the company until six months after the statement was issued.

For more:
- see this NYT article
- see this Bloomberg article
- see this WSJ article (sub. req.)

Related Articles:
Vodafone's $10B Ono deal could complicate AT&T's possible European efforts
AT&T CFO: We'd be surprised if regulators approved a Sprint/T-Mobile deal
AT&T rules out bid for Vodafone, but speculation continues
Report: AT&T gearing up for Vodafone takeover in 2014
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