Vodafone shareholders may not be in line for the huge cash windfall that had been predicted following the sale of its stake in Verizon Wireless.
As the third-largest merger and acquisition deal in history looks set for completion, some analysts have predicted a total payout of up to $70 billion.
But with Vodafone, the world’s second-largest mobile phone group, contemplating further mergers and acquisitions, any cash payouts could be much less.
Around 400,000 Irish people got shares in Vodafone as part of its acquisition of Eircell from Eircom in 2001 and are nursing losses.
In June, Vodafone agreed a €7.7 billion takeover of Kabel Deutschland, its biggest deal since acquiring its Indian operations in 2007, reflecting the belief of Vittorio Colao, the group's chief executive, that bundled deals of internet and telecoms connections will help it win customers, buoy profit margins and increase customer loyalty.
According to sources close to the Verizon sale talks, Vodafone has the appetite to conduct similar deals in markets such as Spain, Italy and the Netherlands and would have been unlikely to have engaged in talks over the sale of its 45 per cent stake in the US wireless operator without a future M&A strategy in place.
Following an agreed sale, Vodafone could make an offer for Ono, the Spanish cable operator, or Swisscom's Fastweb in Italy, some analysts believe. Analysts at Bank of America Merrill Lynch estimate these deals would cost Vodafone about €7 billion and €2 billion respectively.
Link to Dutch cable firm
Having bought Cable & Wireless Worldwide in the UK last year, Vodafone has also been linked with Ziggo, a Dutch cable operator, which has a market capitalisation of €6 billion.
An array of such deals would accelerate Vodafone’s convergence strategy. But they would still let it make a significant payout to shareholders and would have only minimal impact in making it less vulnerable to predators.
Most notable among these is AT&T, which has a strong interest in Vodafone's sizeable wireless presence in Europe, according to people close to the US telecoms company. The Dallas-based company sees big potential in mobile data services such as home automation and connected car navigation and entertainment systems as 4G is introduced across the Continent.
AT&T has made it clear that it is interested in entering the European mobile market.
However, it has little interest in Vodafone's expanding portfolio of fixed line and cable assets. Analysts believe these would be attractive to John Malone's Liberty Global, which has a substantial portfolio of European cable assets.
Deterrent to predators
Yet there is one deal that would dramatically accelerate Vodafone's convergence strategy and make it less appetising to predators: an acquisition of Liberty Global.
On the day Vodafone confirmed its talks with Verizon, shares in Liberty Global spiked 3.3 per cent. Vodafone has also recently held discussions with Liberty Global about buying some of its cable assets in central Europe.
Despite this, many analysts believe Vodafone will steer clear of such big deals; they see smaller bolt-ons such as Italy’s Fastweb as more likely.
Sticking only to smaller acquisitions would leave Vodafone free to make sizeable payouts to shareholders.
Analysts at JPMorgan predict Vodafone could pay out $20 billion upfront and, over time, around half of all Verizon sale proceeds to investors. But with analysts at the New York-based bank valuing Vodafone at £62 billion after a Verizon sale, the group is vulnerable to a takeover.
Some analysts believe Vodafone will have to establish whether it is an acquirer or a takeover target. Robin Bienenstock, a telecoms analyst at Sanford Bernstein, said: "If you are in a world where everyone decides scale matters, you must decide whether you eat or are eaten."