Outlook: Could this be the deal too far for Chris Gent?

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The Independent Online
NOBODY CAN fault the logic of what Chris Gent, chief executive of Vodafone AirTouch, is trying to do by mounting a hostile bid for Mannesmann. His vision of a global mobile telecommunications company is being severely jeopardised by Mannesmann's bid for Orange, which threatens to freeze him out of any credible presence on the Continent and create a powerful European alternative to Vodafone.

Nor can anyone doubt the enthusiasm of his backers, both in the City and on Wall Street. Vodafone has been so extraordinarily successful in generating value over the past 10 years that in the eyes of investors, it can do almost no wrong. If Mr Gent thinks it necessary to bid for Mannesmann, so be it; he'll have all the support he needs.

The danger is, however, that he is biting off more than he can chew.

It is less than a year since Vodafone more than doubled its size by merging with AirTouch. Since then, AirTouch's US assets have been merged with Bell Atlantic's mobile operations. These two transactions in themselves might seem seismic enough, stretching Mr Gent and his management team to its limits.

Now they are planning to take on Mannesmann as well. In the course of so doing, they'll be almost doubling their size again. The world will be awash with Vodafone paper, the lines of command will become stretched to breaking point, and the task of integration, given the differing cultures and technologies, will be daunting to the point of near impossibility.

Egged on by fee-hungry advisers, Mr Gent is proposing to open up a second front in his campaign for global domination before stilling the waters on his first. As every historian of military affairs will testify, few generals ever succeed in such an endeavour. For Mr Gent, Mannesmann looks ominously like the deal too far. Logic is on his side, but the practicalities are against him.

Of course, Mr Gent is far too wise an old bird not to have realised these things. Hubris is not a word generally associated with this most collected and professional of managers. He is as acutely aware of the dangers as any. Throwing caution to the wind won't come easily, and he'll only do it because he believes he has no option. Already, the pace of development in mobile telephony has defied even the most optimistic of predictions, both in terms of penetration and technological capability. Globalisation of fragmented national networks is the next logical step and in this regard, Vodafone has been in the van. The trouble is that some of its partners in national networks, of which Mannesmann is one of the most important, want to do exactly the same thing. In bidding for Orange, Mannesmann's Klaus Esser was throwing down the gauntlet; Orange was to be the partner for its D2 and Omnitel networks on the Continent, not the existing minority partner, Vodafone. Mr Esser has forced Mr Gent's hand and he's had to move on his European partner far sooner than he would have liked.

Mannesmann is impressively well defended with an array of poison-pill defenses. There's also the awkward little matter of the double premium Vodafone will have to pay - a bid premium for Mannesmann on top of the premium Mannesmann is already paying for Orange. To top it all, Goldman Sachs may have put itself offside by separately advising on fair value in the Mannesmann takeover of Orange. If the High Court agrees, Vodafone loses one of its most powerful backers. All the same, provided he's prepared to pay the price, Mr Gent can still succeed. Will the bloated beast that emerges be quick and nimble enough for these fast-moving markets? That's a different question and here the lessons of history are not on Vodafone's side.

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