The world's largest mobile telephone company, Vodafone Group Plc, and US rival Cingular Wireless were poised late last night for a head-to-head bid battle that could value struggling AT&T Wireless Services at about $35 billion (€27.4 billion).
Sources close to talks said Vodafone was putting the final touches on a bid, while Cingular was prepared to raise its initial $30 billion, or $11 a share, offer to top Vodafone's overture. But final bid strategies were expected to be left to the 11th hour.
"What happens in these auctions is that everybody is making decisions until the last minute about how they want to play it and then after that, the ball is in the sellers' court," one source close to the talks said.
Vodafone was expected to submit an offer of about $35 billion, or around $12.50 per share. Cingular, the number two US wireless company, has the deep pockets of its parent companies SBC Communications and BellSouth to make an aggressive offer.
The heated interest in AT&T Wireless comes even as the company recently suffered an unexpected fourth-quarter loss and warned that technical and customer-service problems would lead to drop in customers throughout the first half of 2004.
In January, AT&T Wireless lost nearly 4 per cent of its customers and saw its operating income fall more than 20 per cent from a year ago, sources close to the situation have said.
AT&T Wireless was expected to review the bids today and a decision could come as early as next week.
But analysts and traders said AT&T Wireless had no reason to rush, especially since the two suitors may return with sweetened offers if they realise they were outbid.
Hopes of a bidding war sent AT&T Wireless shares to 12-month highs of $11.98, valuing the group at $32.56 billion.
While some Vodafone investors remain unconvinced about the merits of any bold offer, a growing number believe chief executive Arun Sarin would bid for an asset that would give the group long sought-for control of a company in the world's most powerful economy and bring its brand across the Atlantic.
To assuage fears among its shareholders, Vodafone has told some institutional investors it would hold a special meeting to seek their approval to purchase AT&T Wireless, regardless of whether it is required to do so under UK listing rules.
Market reaction to a Vodafone bid, which analysts say could dilute earnings for around four years, hinges in part on whether it could extricate itself from its US wireless joint venture Verizon Wireless.
Its minority stake is valued at $20 billion to $25 billion, but an exit could leave Vodafone with a tax bill of up to $6.0 billion, analysts said. - (Reuters)
