AT&T's Love Affair With Vodafone

| About: Vodafone Group (VOD)
This article is now exclusive for PRO subscribers.

Vodafone (NASDAQ:VOD) returned to investors' radar screen in the wake of news about AT&T's (NYSE:T) interest in acquiring the company. With more telecom companies interested in making the triple play and quadruple play of mobile, land line, TV and Internet coverage to dissuade consumers away from easy switches, AT&T is actively seeking a number of strategic acquisitions toward this goal. However, Vodafone may have its own plan for expansion of its mobile technology coverage in 30 countries, and the deal may not be as trouble-free as expected.

AT&T, the second largest provider of cell phone service in the United States, has shown an interest in snapping up smaller wireless companies for some time now. It has spent the last year searching throughout Europe for likely candidates before settling on Vodafone. In July of 2013, AT&T purchased Leap Wireless (LEAP) for a reported $1.2 billion, but the deal has still not closed. AT&T attempted a purchase of T-Mobile (NASDAQ:TMUS) earlier, but the deal was blocked by the Justice Department. One analyst expects AT&T to pay about $124 billion for the acquisition if it goes forward. AT&T is already looking into what parts of the Vodafone holdings could be spun off if the deal goes through.


Vodafone is a British multinational company with roots that go back to military radio systems in the 1980s. In fact, its name joins "voice," "data," and "phone" to indicate its services. Over the years, the company has taken a number of aggressive actions on smaller companies, absorbing them into the Vodafone name. In 2001, Vodafone was able to introduce the concept of partnership networks that allowed the company to provide international service to local markets using their own brand but without using their own funds. Today, the company operates in Europe, the Middle East, Africa and Asia.

However, Vodafone may not be as open to the AT&T deal as the telecom giant hopes. Vodafone is already working with Verizon (NYSE:VZ) on a $130 billion deal to allow Verizon to take back control of Vodafone's joint stake. Vodafone is ex $84 billion for investors along with Verizon stock.

A potential deal would offer AT&T a number of advantages as it looks to the future to further expand its coverage in major markets on the European continent, bringing in 500 million customers and creating a company with a market capitalization worth $250 billion. Vodafone stock has already risen as news of a potential deal emerged.


Vodafone looks like a promising stock for the medium term.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.