Vodafone AirTouch assumes leading position

The $66 billion (€56

The $66 billion (€56.95 billion) takeover of AirTouch Communications by Vodafone Group will link the leading cellular phone carriers in the United States and Britain.

But their holdings beyond their home markets are the crown jewels of the deal.

The merged group, Vodafone AirTouch, will command a dominating position in continental Europe and a broad reach across Asia through holdings that are propelling the profit and sales gains on both sides of the marriage.

"The international pieces are certainly the heart of the deal and what makes it particularly interesting," said Mr John Tysoe at Societe Generale in London. "This will be a company for the 21st century."

READ MORE

Vodafone on Friday prevailed in the takeover when Bell Atlantic Corp gave up after bidding about $48 billion for AirTouch. With a market value of $110 billion, the Vodafone AirTouch Plc will be a cellular powerhouse and the third largest publicly-traded company in Britain.

But the highlight of the deal, the largest cross-border merger to date, is the new company's international line up.

In Europe, where cellular phone use is surging, Vodafone AirTouch will be comparable to no other provider - holding leading positions in all of the major economies and a network covering 95 per cent of the European Union.

The combined firm will have stakes in the first or second cellular phone networks in Germany, France, Italy, Spain, the Netherlands, Belgium and Greece, as well as Vodafone's top spot in Britain.

"It's almost a contiguous network," Tysoe said. "The only piece missing is Austria."

Vodafone and AirTouch are also partners in a growing Swedish carrier. AirTouch is in Portugal, Poland, and Romania as well.

In Asia, AirTouch is in Japan, South Korea and India. Vodafone has subsidiaries in Australia, New Zealand and Fiji. The British group also has units in South Africa and Uganda. They are partners in an Egyptian carrier.

These engagements are the driving forces behind both companies' growth as price-competition erodes gains in their home markets. In the six months to September 1998, for example, Vodafone booked operating profit of £455 million sterling (€648.42 million), £129 million more than the year-ago period.

But Britain contributed only £23 million to that increase - while 110 million pounds of profit growth came from international markets, according to Reuters' calculations.

Continental Europe alone contributed £78 million to the increase. Vodafone's sales in the period rose 34 per cent - with three quarters of the growth coming from outside Britain.

AirTouch shows similar results. Through the first nine months of 1998, net income climbed to $478 million, a year-on-year rise of $181 million - with $164 million of the increase from international holdings.

In the third quarter, AirTouch added one million new customers - 74 per cent of them from international businesses.

"In the US we are feeling the heat of increasing competition," AirTouch Chief Executive Mr Sam Ginn said when the company reported its third quarter earnings.

Vodafone AirTouch will face competition internationally, but is well positioned to thrive.

The world's population of cellular subscribers is expected to rise from 194.6 million in 1997 to 550 million in 2002, according to market researcher International Data Corp.

Vodafone AirTouch has networks covering about a billion inhabitants, and its combined customer count is 24 million - several times the total of any other international mobile player.

"No one else has this kind of footprint," Mr Tysoe said. Cable & Wireless is also engaged in mobile carriers around the world, but only has about three million customers.

In Europe where mobile phone penetration rates are climbing well ahead of most other regions around the world, the merged group will own stakes in some of the fastest-growing carriers.