AT&T Inc. Ends Vodafone Group Plc Bid Speculation

The shares of Vodafone (LSE: VOD) (NASDAQ: VOD.US) closed at 233p on Friday, losing 7p since the start of the week, as the market failed to be swayed positively over rumours linking the company with a bid for BSkyB.

This morning, the US telecoms provider AT&T (NYSE: T.US) put an end to a different line of conjecture that it would bid for Vodafone. A statement to the London Stock Exchange read: “At the request of the UK Takeover Panel, AT&T confirms that it does not intend to make an offer for Vodafone.”

Speculation had been raging for months that AT&T was contemplating a bid for the FTSE 100 member, ever since the UK company sold off its stake in Verizon Wireless. That particular deal, worth £84 billion, pushed Vodafone shares up 50% since the beginning of 2013 as investors awaited the potential windfall.

Vodafone is now a much smaller company after the Verizon sale with forecasted operating profit of £5 billion for the fiscal year ending March 2015. This is down significantly from the £12 billion for the current year.

It remains to be seen whether any potential bidders remain, with City experts previously suggesting the Japanese firm SoftBank could be interested. Whether Vodafone remains an appealing option is unclear.

If a third party like Softbank entered the Fray, or should Vodafone’s board agree to it, AT&T could yet return to the table.

With a market cap of £113 billion Vodafone’s shares currently trade at 26 times expected earnings and offer a prospective dividend yield of 4.5%.

BT is the other telecom stock in the FTSE 100, and unlike Vodafone, has a P/E below the market average. BT also has greater profitability with a rising, well-covered dividend.

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> Mark does not own shares in Vodafone Group.