As the list of potential suitors became clearer last week, AT&T Wireless Services Inc.’s management took control of the situation by announcing a mid-February deadlines for potential buyers to submit acquisition proposals. The carrier also said it plans to make a decision about its future by the end of the month.
In a filing with the Securities and Exchange Commission, AWS said it expects proposals to be submitted by Feb. 13 and that it would not sign a deal before that date. The filing noted letters containing the deadline were sent to a number of companies including Cingular Wireless L.L.C. and its parent companies, SBC Communications Inc. and BellSouth Corp., in addition to NTT DoCoMo Inc., Vodafone Group plc and Nextel Communications Inc.
“[AWS] really took the bull by the horns,” said SG Cowen telecommunications analyst Tom Watts. “It looks like they were tired of having other companies appear in charge of their future.”
As part of its government filing, AWS also noted current minority shareholder DoCoMo had agreed to waive temporarily its right to be consulted on merger talks between AWS and any potential partner in case DoCoMo submits a proposal. DoCoMo, which maintains representation on AWS’ board of directors due to its 16-percent ownership stake in the U.S. carrier, refused to comment on plans to submit a proposal to AWS before the Feb. 13 deadline.
“DoCoMo entered into the agreement in order to preserve a broad set of options and has not made any decision to make any proposal to AT&T Wireless at this time,” DoCoMo said in a statement.
Industry observers remained mixed on predicting DoCoMo’s next move, noting that while the Japanese telecommunications giant would benefit from a larger presence in the U.S. market, the company has been burned on previous international investments and recently pulled out of a number of its oversea partnerships.
“[DoCoMo] definitely has the potential to raise the money necessary to buy AT&T Wireless, though I suspect they may be just as happy keeping their minority position in whatever the final outcome of an AT&T sale becomes,” said Ned Zachar, telecommunications industry analyst at Thomas Weisel Partners.
Cingular, which remains the odds-on favorite to acquire AWS, reportedly received approval from both of its parent companies to make a formal bid for AWS following an informal proposal last month valued at around $30 billion, or $11 per share. The formal proposal likely would have to increase following the recent jump in AWS’ stock price to more than $11 per share.
SBC noted last week that it would be open to certain acquisitions in the wireless space even if it was forced to dilute its own stock to consummate a deal.
“We’d be willing to tolerate dilution,” said SBC Chief Financial Officer Randall Stephenson. “To get the right opportunities done, yeah, there would be willingness to accept dilution.”
Vodafone also left the door open to a potential deal with AWS as chief executive Arun Sarin refused to comment on whether Vodafone would place a bid for AWS, but noted the company would do whatever was in the best interest of its shareholders.
Analysts noted that despite Vodafone’s 45-percent interest in U.S. heavyweight and CDMA-based carrier Verizon Wireless, Vodafone could provide a more unified presence to its customers by offering GSM-based services in the U.S.
“The cold reality is that Vodafone needs a credible U.S. play to tap the growth opportunities which the region offers, and its non-controlling stake in Verizon Wireless, which uses a completely different wireless technology to all Vodafone’s other global outfits, is unlikely to do the trick,” said industry analyst firm ARCchart Ltd.
Vodafone does have a reported “out” in its agreement with Verizon Communications Inc. that would force Verizon to acquire its stake in Verizon Wireless for $20 billion, though both companies have downplayed the possibility. Analysts have also questioned whether Vodafone would rather own nearly half of the largest and fastest-growing carrier in the United States or all of a TDMA/GSM carrier that has recently struggled through operational difficulties.
“I’m sure if [Chris] Gent was still in charge at Vodafone a deal would have already been done,” noted Thomas Weisel’s Zachar, commenting about the former Vodafone chief executive who helped grow the company’s worldwide presence through numerous acquisitions. “But the new management seems more conservative about expansion.”
Verizon Communications’ chief executive Ivan Seidenberg added further fuel to the fire last week, commenting Verizon would be interested in controlling all of Verizon Wireless, which analysts note has become an increasingly important piece of the telecommunication company’s operations.
“We certainly would not shy away from wanting to own 100 percent of Verizon Wireless,” Seidenberg said. “The real choice on this is Vodafone’s. It’s their call to make the step.”
While DoCoMo, Cingular and Vodafone remain at the top of the list of potential AWS suitors, German telecommunications operator Deutsche Telekom AG, which owns T-Mobile USA and reportedly did not receive a bidding invitation from AWS, seemed to distance itself from the situation.
“To put it clearly: We are not in acquisition mode,” DT’s chief executive Kai-Uwe Ricke told reporters last week.
Bolstering DT’s attempt to distance itself from the potential AWS bidding war is the continued growth of its current U.S. subsidiary T-Mobile USA Inc., which last week reported more than 1 million net customer additions during the fourth quarter of 2003 and 3 million net adds for the entire year, compared with 128,000 net additions for AWS and approximately 1 million net adds for all of 2003.
