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AT&T eyes Vodafone for entrance to Europe despite investor pessimism

AT&T is giving serious thought to acquiring a European cellular provider even though certain investors and analysts have warned against it doing so.

The USA’s second largest wireless operator has been exploring the possibilities of taking over a large scale European carrier with Vodafone strongly rumoured to be one of the name’s on AT&T’s list of targets.

Telecoms bankers familiar with the subject told Reuters that AT&T has been looking at taking on a pan-European carrier for some time with EE and Telefonica also rumoured to be possible targets.

Unfortunately for AT&T some investors have expressed disquiet at the plans due to the high competition in many markets and the fact that wireless airwaves regulation is particularly complicated in Europe.

"Generally speaking I'm not comfortable at all with them doing anything in Europe," said Mike Wetherington, an analyst at Barrow, Hanley, Mewhinney & Strauss, AT&T’s 14th largest shareholder. "We have stayed away from a fair amount of the European telecom names because of a discomfort with, among other things, regulation and competition."

AT&T chief executive Randall Stephenson stated earlier this week that there is “a huge opportunity for somebody” to upgrade European wireless networks and it follows similar comments he made about 4G LTE in Europe last month.

If AT&T were to be that company, there is more than a hint of scepticism amongst analysts with New Street’s Jonathan Chaplin stating there are “serious challenges” along the way if AT&T were to try and gain market share by upgrading the network.

"There is no evidence yet of this strategy succeeding in the European markets where it has been attempted," Chaplin said.

Any deal for Vodafone would have to wait until it has completed its split from Verizon, which will see the latter pay $130 billion [£83 billion] to buy Vodafone’s 45 per cent stake in the Verizon Wireless joint venture – the third largest business deal of all time.