Make of this what you will: "Deutsche Telekom sees potential offers which value its T-Mobile US unit at $35 a share as being substantially too low, a person familiar with the matter said on Thursday, countering a report from Bloomberg. Bloomberg earlier reported that Deutsche Telekom is willing to negotiate a sale of T-Mobile if an offer values the business at $35 or more, citing a source. Deutsche Telekom earlier this month rejected an offer from Iliad for T-Mobile." (Reuters)
Spain’s Telefónica has stormed ahead in the battle for Brazil’s telecoms market, convincing Vivendi to choose its €7.45bn offer for the French group’s Brazilian broadband business. Vivendi said on Thursday it would enter exclusive negotiations with Telefónica over the sale of its Brazilian unit GVT, shunning a lower offer from Telecom Italia. (Financial Times)
Telefonica and Telecom Italia have both launched new bids for Vivendi's (OTCPK:VIVHY) GVT, which will be examined by the latter's supervisory board today. Telefonica (NYSE:TEF) has raised its bid to €4.66B in cash and will offer Vivendi a 12% stake in Telefonica Brasil (NYSE:VIV) - a bid valued at a total €7.45B. Telecom Italia's (NYSE:TI) offer represents a total enterprise value of €7B ($9.24B) and includes €1.7B in cash, a 16% stake in Telecom Italia and 15% of TIM Brasil.
Such a busy year for Oi, Brazil’s second-biggest phone company by market capitalisation. First it bought Portugal Telecom in May, funding that with an R$8 billion rights issue. Then on Wednesday it announced its intention to buy Telecom Italia’s two-thirds stake in TIM Brasil, a mobile operator.
The deal could be tricky to finance – Oi’s net debt is already over four times its earnings before interest, tax, depreciation and amortisation. The company would need to tap investors yet again. Did the market roll its eyes? No. Oi’s shares leapt 6%, along with those of its target, TIM.
That’s a small move in the context of another part of Oi’s busy 2014: a 60% share price drop year to date. But the TIM deal shows that Oi could act as a consolidator in the Brazilian mobile market.
Brazil has three operators other than Oi: Vivo (owned by Telefónica), Claro (America Movil) and TIM. Excessive competition has driven down ebitda margins for everyone, but especially Oi. According to Berenberg, Oi’s ebitda margin has fallen 700 basis points, from 35%, since 2010.
The merged entity would become the largest player in Brazil’s five most populous states. Yes, Oi would need to divest assets to placate the antitrust regulator CADE in those markets where the new entity would exceed 50% share. But an Oi plus TIM combination would cross this threshold in far fewer states than a Vivo or Claro combination with TIM would. So Oi looks like the right buyer.
First AT&T/China mobile now Softbank. Rumour control is working overtime. The thing that worries me is that this is likely to be just smoke and mirrors and ordinary investors are suckered by the big boys that capitalise on them. Where's the substance to these rumours, does AT&T and softbank have the cash to buy Vodafone. Does Vodafone want to be taken over? There are plenty of poison pill tactics that Vodafone could use to put off a prospective buyer. Granted that if someone did bid, i've no doubt that 3 quid a share is likely to be the price area, but i just don't believe it. It's just pure speculation and the press are fueling it.
I wasn't presenting that figure as a valuation, it was just an opinion on what may happen. The share consolidation was part of a cash/(verizon share) payout to shareholders. They giveth in one hand and taketh away with the other. If Voda+VW = £1.60 = Voda shares x 6/11 + (remaining cash) + (cash/Verizon shares given to shareholders) <> £1.60 per share. At least that's what it said in the fortune cookie i had before. If the city perceives that the the new additions and the cash that Vodafone has don't amount to the value of the VW stake then it's not inconceivable that the share price could drop significantly from its current price.
While I believe Softbank is less likely to make a play for VOD than China Mobile or AT&T, a Softbank move is certainly possible. The primary reason why I believe a bid is unlikely is that Softbank would seem to be better suited to acquire Yahoo.
In my opinion, VOD is by far and away the most valuable telecom asset currently in play for M&A. Due to the current financing environment, a deal for VOD is very much possible right now. I believe AT&T is most likely to make a bid for VOD but China Mobile and Softbank could also be interested. The amount of interest in VOD also suggest a bidding war is possible which could lead to significant upside for VOD shares.
Since selling its stake in Verizon Wireless VOD has become a rumored takeover target. AT&T, China Mobile, and Softbank are all potential bidders. VOD is currently the most valuable telecom takeover and is likely to receive at least one bid.
Shares of Vodafone (NASDAQ:VOD) have been moving higher on continued M&A rumors. VOD has become a takeover target after Verizon (NYSE:VZ) purchased the 45% stake in Verizon Wireless that VOD had owned. VOD returned most of the proceeds from its Verizon Wireless sale directly to shareholders via a special dividend and VZ share distribution. This transaction immediately put VOD in play as a potential takeover target for a two primary reasons. Most importantly, the distribution of proceeds from Verizon Wireless significantly reduced VOD's enterprise value making it a potential takeover target. Additionally, the most often rumored suitor, AT&T (NYSE:T), would not have been able to acquire VOD due to its stake in Verizon Wireless. Potential Buyers
Since VOD announced its deal to sell its stake in Verizon Wireless, AT&T has been the most widely rumored bidder for VOD. The move makes a lot of sense given AT&T's desire to grow its scale and expand into Europe. However, when AT&T announced plans to acquire DirecTV (NASDAQ:DTV) in a deal valued at close to $50 billion hopes of a deal between AT&T and VOD decreased. In January 2014, AT&T also made a statement saying that it has no plans to bid for Vodafone. Under UK law, this statement barred AT&T from making a bid for at least six months. Six months has since passed and AT&T could again, legally, pursue a bid for VOD. Rumors recently began circulating that AT&T is again interested in VOD. Despite its ongoing move to acquire DirecTV, I believe AT&T could, and should, still acquire VOD. VOD would offer AT&T increased scale and diversification.
China Mobile (NYSE:CHL) has long been rumored to be interested in acquiring a controlling interest in VOD. China Mobile has more than $70 billion of cash and its balance sheet which means that it is well positioned to make a move. However, if China Mobile makes a play for VOD I would expect it to be in the form of taking a large stake, 15-20% in the company. This outcome would likely be positive for VOD shares but not as significant of a positive as a bid for the whole company. If AT&T is interested in VOD, I do not see China Mobile being able to make an offer that would top AT&T's offer. However, anything is possible.
Japan's Softbank (OTCPK:SFTBF) has also been rumored to be interested in VOD. Softbank had been pushing for a merger between Sprint (NYSE:S)and T-Mobile (NYSE:TMUS). With that deal now off the table, Softbank is likely exploring all options including VOD. The upcoming Alibaba IPO could give Softbank the opportunity to sell shares or borrow a significant amount of money against its
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