Vodafone has agreed to purchase US cellular operator Airtouch, fending off a rival bid from Bell Atlantic in a deal likely to benefit European mobile users.
Analysts said the combined $110 billion company will be able to offer pan European mobile phone services and promote worldwide adoption of third generation mobile standards.
Late Friday, rival bidder Bell Atlantic withdrew from merger talks with Airtouch, paving the way for Vodafone to ink the deal that will create by far the world's largest wireless operator. Vodafone will pay around $56 billion for the operator.
Under the terms of the deal, Airtouch stockholders will receive five Vodafone ordinary shares and $9 in cash for each Airtouch common share. Each Airtouch share is valued at $97 based on Vodafone's closing price Friday. The deal must now be cleared by regulators both sides of the Atlantic.
Headquartered in Newbury, England, Vodafone Airtouch will operate in 23 countries worldwide, with a particularly strong presence in Europe.
"The European market is a very good deal for both companies, because they can put a pan European service together and offer a more consistent face, particularly for corporate customers," said Elaine Axby, senior consultant at Schema in London.
European mobile users could also see call charges fall as the operators will avoid some of the interconnect charges they currently face from handling each other's traffic, said Patrick Donegan, analyst at the Yankee Group Europe, in Watford.
Vodafone Airtouch will also be able to introduce harmonised access to different services in Europe, such as voicemail, that are sometimes difficult through existing roaming arrangements, said Donegan.
Vodafone is the UK's largest cellular operator and also has stakes in operators in France, Malta, Greece, Sweden, Germany and the Netherlands. Airtouch meanwhile has stakes in operators in several European countries including Portugal, Spain, Italy, Romania, Poland, Belgium, Sweden and Germany.
Outside Europe, Vodafone has interests in Australia, New Zealand, Egypt, Fiji, South Africa and Uganda. Airtouch has around 12 million customers in the US and has interests in Egypt, India, Japan and South Korea. Both companies have an interest in the Globalstar satellite communications system.
Third generation mobile standards, being developed to enable more sophisticated mobile phone handsets and networks, are also likely to benefit from the formation of Vodafone Airtouch, analysts said.
Asia, Europe and US have been finding it difficult to agree on a unified third generation mobile standard, something the worldwide reach of Vodafone Airtouch could help, said Schema's Axby.
"Europe tends to mandate a standard, then Japan, but then the US won't mandate it. Potentially, what Airtouch and Vodafone do will become so huge that it becomes the de facto standard," said Axby.
"Third generation is a nice benefit. Airtouch already has a joint venture in Japan with a UMTS operator. This will give them a headstart in Europe," said Donegan. Airtouch also brings valuable CDMA - the widely used US standard - experience to Europe, he added.
When licenses for UMTS operators are offered in Europe later this year, Vodafone Airtouch will be in a position to bid for licenses in most countries, said Donegan. "They have an excellent opportunity for creating a pan European UMTS network."
The massive new company, with a combined market capitalisation of around $110 billion, will be a powerful force in the global telecoms market, said Airtouch chief executive Sam Ginn, who will serve as non executive chairman of the new company.
"Vodafone Airtouch will have the size and financial resources to take advantage of future opportunities, making the company a leading force not only within wireless but throughout the telecommunications industry," said Ginn.
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