British mobile phone giant
Vodafone Group Plc
(
VOD
) has granted an extension until March 29 to make a potential bid
for the acquisition of Cable & Wireless Worldwide Plc.
The same deadline was given to
Tata Communications Ltd
(
TCL
), which also showed interest in acquiring Cable & Wireless
early this month. Tata Communications has hired Standard Chartered
plc as its financial adviser for evaluating the benefits of the
offer.
Last month, Vodafone disclosed its intention to acquire Cable
& Wireless for £700 million ($1.1 billion). If the deal is
proposed, it will likely be in cash according to the
Times of London
. The company will have to drop the bid, should it fail the
deadline, under British takeover rules.
Over the next few years, mobile data expansion will be the key
growth driver for both Vodafone and the industry at large. The
company is accelerating its investments in faster networks to boost
smartphone sales and increase data traffic.
Vodafone is way ahead of its competitors in upgrading the 3G and
HSPA+ networks. The launch of 4G Long Term Evolution services in
Germany in 2010 was a huge success. Vodafone plans to launch the
LTE network in Spain and Italy over the short term. We believe the
ongoing efforts to upgrade the existing network infrastructure
should result in higher average revenue per user, higher minutes of
use and improved operating margins through greater network
efficiency.
The prospect of mobile data is better in emerging markets with
an expected mobile penetration rate of 70% compared with 130% in
mature markets.Given the rising demand for Internet on cell phones,
the potential Cable & Wireless deal would provide more data
access to smartphones customers.
Coupled with successful smartphone and data services, Vodafone
is looking for further expansion in the emerging markets of Eastern
Europe, India and Africa through new growth strategiesand by
exiting minority holdings to boost liquidity, free cash flow and
shareholders' return.
However, persistent revenue declines in southern European
operations, regulatory pressure, stiff competition from larger
rivals like
Verizon Communications
(
VZ
) and
AT&T Inc.
(
T
), and reductions in mobile termination rates pose major threats to
the stock.
We are currently maintaining our long-term Neutral
recommendation on Vodafone. For the short term (1-3 months), the
stock retains a Zacks #3 (Hold) Rank.
AT&T INC (
T
): Free Stock Analysis Report
TATA COMMUNICAT (
TCL
): Free Stock Analysis Report
VODAFONE GP PLC (
VOD
): Free Stock Analysis Report
VERIZON COMM (
VZ
): Free Stock Analysis Report
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