Vodafone in AT&T bid war

FEARS that Vodafone may be caught up in a costly and protracted battle for America's AT&T Wireless intensified today as its bid rival, Cingular, sweetened its own offer to $38bn (£20.2bn).

Shares in Vodafone topped the FTSE 100 fallers, dropping 5p to 131p, as investors concerned about the effects of a bruising transatlantic bid war dumped the stock.

Critics of the deal said it was almost certain the British group's chief executive Arun Sarin will have to pay far more than he envisaged originally if he wants to be sure of winning the auction for AT&T Wireless.

Sources close to Cingular, America's second- largest mobile phone group, confirmed it had answered AT&T's call for both parties to up their offers by increasing its bid from about $13 a share to $14.

An insider said: 'We raised our bid to $14 last night. Basically, the ball is back in Vodafone's court. It is now a question of whether they want to go higher, and we believe they will.' Vodafone has steadfastly refused to comment since conceding it was considering a move for AT&T Wireless, the current No 3 player in the US but losing both customers and money.

The British group is believed to have submitted an offer of around $35bn by Friday's deadline.

Cingular, a joint venture owned by SBC Communications and BellSouth, is thought to have raised its original bid from $11-a-share before the deadline to head off any Vodafone bid.

Japan's NTT DoCoMo, which owns a 16% stake in AT&T Wireless, said last week it was not entering the battle.

No official statement was expected from either American-firm today given that marketson Wall Street are closed for the Washington's Birthday holiday. AT&T may wait until 29 February before taking a final decision on its mobile phone division.

Analysts believe Cingular is the clear favourite given the cost-savings it could generate from the deal because of the overlaps in their US businesses. Vodafone's only US presence is its 45% stake in Verizon Wireless.

While the City admits a deal would grant Vodafone its longheld ambition of gaining operational control in one of the world's largest markets, it would significantly dilute earnings over the following two years.

Analysts also say Vodafone would be selling its Verizon stake from a position of weakness and that Sarin has enough on his agenda with the forthcoming 3G launches in Europe and Japan.

One analyst said: 'I doubt that Vodafone will be able to land this deal. I think Cingular will outbid them, it makes more sense and there is a lot more potential synergies for them than for Vodafone.'