City gives Vodafone the thumbs up

ARUN Sarin put the City in a state of panic over the past week, but investors now know the pioneering head of Vodafone is not as prepared to bet the house on the American dream as they first feared.

Whether he can paper over the cracks in his credibility as chief executive of the mobile phones giant is yet to be seen, but his reputation as a strong proponent of shareholder value may just emerge intact.

Fund managers queued up to complain that Vodafone risked damaging earnings significantly if it decided to better Cingular in a bid to get its hands on AT&T Wireless and secure an operational foothold in the US.

Now Sarin can concentrate on the business at hand, including next generation 3G launches in Europe and Japan, before deciding whether to make another move for control of French telecoms group Cegetel.

He can also console himself with the knowledge that Vodafone's $25bn (£13.2bn) stake in Verizon Wireless will have been marked up as a result of the consolidation in the American market following Cingular's victory.

Christian Maher, analyst at Investec, said: 'When all this began Vodafone was at 145p and that was before we knew the market was going to consolidate from six players to five.'

He added: 'There is a sense of relief in the market, we haven't really heard from the company, but what they haven't done is trumped Cingular again and that is in Sarin's favour.' The City always believed Cingular was the clear favourite for AT&T Wireless given the huge synergies that could have been squeezed out by the US No 2.

Some believed Vodafone's earnings could have shrunk by 20% if it was forced to overpay for its target, and believed this outweighed the benefits of having a seamless technology platform across the globe.

Vodafone's apparent willingness to be drawn into a poker game with Cingular will have brought back the halcyon days of empire building and enormous allshare deals under Sir Christopher Gent.

Whether the Wild West showdown would have had a different outcome with Gent at the trigger will never be known. 'He may just have gone on bidding,' one analyst mused.