Article From Today’s FT
How much bid speculation is in the price of Vodafone shares? Answer: less now than a week ago. The stock has slipped 10 per cent over 7 days, and two related events can be blamed. First, comments from AT&T boss Randall Stephenson, hosing down conjecture that the US giant is planning a bid for the UK mobile operator. Second, talk that Vodafone has put in an offer for Ono, valuing the Spanish cable group (including debt) at over #$%$7bn. If Vodafone buys Ono, its appeal for AT&T will fade further, runs the thinking. Hmm. There are several lessons here. The first is that buying a stock solely in the hope that a bid will emerge is gambling. The second is that any management which sits on its hands, afraid its investors will lose a bid premium if it makes strategic moves, is not doing its job. Vodafone has been clear that it aims to supply broader packages of services in big markets as triple and quad-play offerings expand.
Acquisitions are a means of making this possible. After its Kabel Deutschland buy, the interest in Ono is no surprise. What would be a fair price for Spain's largest cable group? At #$%$7bn, the enterprise value is about 10 times Ono's 12-month earnings (pre-interest, tax, depreciation, amortisation) to end-September - not excessive for a cable deal. True, Ono has seen falling residential revenues. But its bundled services have done better (with mobile offered via a Telefonica agreement). Combining Ono with Vodafone Spain could yield operating and capex savings with a net present value of #$%$1.25bn, reckons Citi - and the Ono mobile business could also move on to Vodafone's network, for further savings. As for Vodafone shares, they may still contain some bid premium, so the volatility could continue. But for investors who like the core strategy that should matter little. And anyone else should be shopping elsewhere.
Looks like the FT people are on a real mission to chase off speculators. Not sure who is worse about taking the singular comment out of context, WSJ or FT. Some heavy hitting players in the big tug of war. Good stuff here. If the fools bothered to read the full Stephenson transcript then it would be obvious VOD's move for cable and fiber assets is very much in line with what Stephenson is doing in the U.S. This media push is great fodder for technical gap filling to say the least. Ono announcement might take it to the full gap fill.