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News > Deals
Vodafone eyeing AirTouch
January 5, 1999: 1:48 p.m. ET

Biggest U.K. mobile phone firm may make bid topping Bell Atlantic's offer
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NEW YORK (CNNfn) - Britain's largest mobile phone company, Vodafone, leapt between Bell Atlantic and AirTouch Communications Tuesday, threatening to break up the prospective merger deal between the two telecom providers.
     In response to speculation of a deal in the Wall Street Journal, both Vodafone and AirTouch, confirmed they are in talks.
     "Following recent press comment, Vodafone Group PLC confirms that it has made an approach to AirTouch Communications Inc. regarding a possible merger," Vodafone said in a brief statement.
     For its part, AirTouch said it is reviewing Vodafone's proposal but there is no assurance any agreement will be reached.
     While terms of the bid weren't available, the Wall Street Journal quoted sources familiar with the deal as saying that the Vodafone offer would be mostly stock and would exceed the proposed $45 billion merger being discussed between Bell Atlantic and AirTouch.
     Vodafone (VOD) and AirTouch (ATI) have long been seen as potential merger partners, given their strong core operations and complementary overseas interests. Vodafone is strong in northern European countries such as France and the Netherlands, while AirTouch has operations in Spain, Italy and Portugal.
     The two companies held preliminary tie-up talks about 18 months ago, but they failed to result in any deal.
     On Sunday, Bell Atlantic (BEL) and AirTouch confirmed they were in merger talks but said they would have nothing further to say until they reach a definitive agreement or break off talks.
     Their proposed $45 billion stock deal would combine Bell Atlantic's 5.7 million wireless customers, primarily on the East Coast, with AirTouch's 7.8 million clients in the western United States, transforming the regional Baby Bell into the second-largest wireless company, behind AT&T (T).
    
Who may win and why

     Telecom analyst George Reed-Dellinger of HSBC Washington Analysis told CNNfn that the prospect of merging with AirTouch means different things to its suitors.
     For Vodafone, already the leading international representative in the wireless arena, a deal with AirTouch provides it the opportunity to extend its presence into the United States, Reed-Dellinger said.
     For Bell Atlantic, the advantage is in expanding its service and competitive edge domestically. "With AirTouch, you're getting nationwide reach if you're Bell Atlantic in providing a wireless service. And wireless service is probably a higher value-added service than plain old local telephone service. So here you're talking about strategic and potentially competitive marketing advantage."
     But the competition for AirTouch, which Reed-Dellinger expects to be volatile over the next few days, may be less about which company AirTouch is more valuable to than who's got the deepest pockets.
     "It might be a function of who can pay more. And Vodafone has got, I think, possibly more flexibility to pay more than Bell Atlantic. It may also have the option to bring in other partners, (such as) a Bell South or a WorldCom."
     There is speculation that Bell Atlantic's bid could go as high as $50 billion, but whether that will be enough to clinch the deal will depend, among other things, on the breakdown between cash and stock paid and the time frame in which shareholders would receive their money, Reed-Dellinger said.
     On Monday, AirTouch and Bell Atlantic shares were hit hard over concerns about the price Bell Atlantic would be willing to pay for the deal and the knowledge that Bell Atlantic would have rival suitors with which to contend.
     Also weighing on investors' minds was a potential obstacle to the Bell Atlantic proposal -- its existing $52.8 billion agreement to merge with GTE Corp. (GTE). The possibility that it may be engaged in two simultaneous mergers is likely to raise antitrust concerns, and any deal with AirTouch is dependent on approval by GTE.
     But in Tuesday trading the companies' shares regained nearly all of or more than the ground they lost Monday. By midday, stock in AirTouch was up 5-9/16 to 73-13/16, while issues in Bell Atlantic climbed 1-11/16 to 53-5/8. Vodafone shares, already basking in record new subscriber figures released Monday, built on gains from the last session, rising 6-3/8 to 181. Back to top
     -- from staff and wire reports

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Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.