Merger, acquisition frenzy continues

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Mergers and acquisitions are proliferating worldwide, with the strongest mark being made in Western Europe. Carriers are scrambling to maintain their footholds, while looking to the next potential market investment.

Vodafone/Mannesmann

The battle between Vodafone AirTouch and Mannesmann continues, as Vodafone AirTouch revealed its wireless data and Internet plans and Mannesmann stiffened its defense.

Vodafone AirTouch launched its formal US$128.7 billion hostile takeover bid for Mannesmann after the German company flatly rejected an earlier all-stock bid of about US$106 billion. Vodafone AirTouch added that the bid was not dependent on European Commission clearance.

At press time, Vodafone AirTouch presented details about its single worldwide data technology and announced nonexclusive agreements with Sun Microsystems, IBM, Ericsson, Nokia and Palm Computing, among others. The company said the average revenue per Vodafone subscriber would increase between 20 percent and 25 percent by 2004.

Mannesmann kept on the defensive with a newspaper campaign citing the risks to shareholders. Its formal defense document, in which the company will argue that the hostile takeover undervalues it by nearly 50 percent, was due 14 January.

Vodafone said a merger of the companies would create the world’s leading international mobile carrier with 42 million proportionate customers worldwide and pops totaling about 510 million.

If Vodafone AirTouch is successful in its bid, the company will have to divest itself of the Orange assets Mannesmann is trying to purchase. Vodafone said it plans to establish an arm’s-length arrangement to hold Orange until it is able to de-merge Orange to the combined company’s shareholders.

BT/Esat/Telenor

British Telecommunications said it had agreed to buy Ireland’s Esat Telecom, the country’s second-largest telecom company, for US$2.5 billion cash. BT offered US$100 for each Esat American Depository Share (ADS).

The Esat board recommended the BT offer.

Esat had been fighting a hostile takeover attempt by Telenor, Norway’s state-owned telecom operator, including an increased offer of US$85 per ADS by Telenor. Telenor increased its hostile cash offer for Esat following its collapsed US$47 billion merger with Telia.

The increased offer valued the entire issued ordinary share capital of Esat at about US$1.9 billion from the previous US$1.6 billion.

BT also said it acquired the 1 percent stake in Esat Digifone, Ireland’s second-largest mobile phone operator, held by Irish entrepreneur Dermot Desmond, giving BT a 50.5-percent stake in Digifone. Telenor and Esat are partners in the Digifone wireless business, each owning 49.5 percent.

E-Plus/KPN

U.S.-based BellSouth exercised its right of first refusal to acquire 100 percent of E-Plus, Germany’s third-largest mobile operator. As part of the deal, KPN Telecom will take over a 77.5-percent stake, and the two carriers will share control of E-Plus.

The move stopped an October bid by France Teleom to acquire the stakes of E-Plus owned by Vodafone AirTouch and German utilities Veba and RWE.

Under terms of the agreement, KPN is providing BellSouth a US$9.4 billion loan to purchase the Vodafone and Veba/RWE 77.49-percent E-Plus holdings. KPN then will convert the loan into a holding company, BellSouth GmbH, which will own and operate E-Plus.

BellSouth will retain its current 22.5-percent E-Plus share, which is valued at US$7.8 billion, BellSouth said.

“Our ownership stays the same, but we end up with shared control versus limited control,” said BellSouth Spokesman Gary Forsee.

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