Vodafone’s latest deal has called up a clever defence against predators


Click to follow

OUTLOOK: Dialling up a deal is Vodafone’s signature talent, and has been so under successive chief executives. The latest, unveiled by the incumbent Vittorio Colao, is the purchase of Spanish cable TV operator Ono and it’s taken quite a phone bill to get done.

He’s paid €7.2bn (£6bn) for the business, about €1bn more than the initial indications. But what’s a few free phone calls between friends?

That still puts the price in the realm of analysts’ estimates, but the multiple of Ono’s earnings is a frothy one, even after the considerable cost and revenue synergies Mr Colao says he can extract.

All the same this deal, following hot on the heels of year’s takeout of cable operator Kabel Deutschland, could prove worth the outlay on several fronts. At the most basic level it should help stabilise the company’s shaky Spanish offering, through adding high-speed broadband to the portfolio of services Vodafone offers to customers.

On a broader level it fits with a strategy being pursued by many of Europe’s telecoms giants, which want to bundle up and sell an array of services including mobile, fixed line, broadband and TV.

But what’s most interesting is the tactical component of the transaction, which utilises some of the vast proceeds from Vodafone’s sale of its US joint venture to its partner Verizon.

There have been suggestions that this acquisition, and the one in Germany, might make Vodafone less attractive to its most likely predator, US giant AT&T.

The poison pill as a defence against predators is frowned upon these days, at least here in the UK – and Ono isn’t that. But it might just make Vodafone harder to swallow by the time AT&T has served the six months in purdah demanded by the Takeover Panel after it kiboshed widespread speculation of an imminent bid.

The City loves deals and a takeout of Vodafone would be the deal to end all deals and could generate the fees to end all fees.

But longer term shareholders might welcome this particular phone bill. They’ve already received a fat payout from one dollar deal in the form of a special dividend. Do they really need another? After all, where would fund managers put the money? Royal Bank of Scotland? Or some of those natural resource giants from former Soviet states?

The obvious reaction to that from any sane pension fund? Ono, ono, ono! Quick, get on the phone to Vodafone’s investor relations: we want more deals like this. We’ll back them, whatever the bill.