Vodafones(LSE: VOD)(NASDAQ: VOD.US)performance so far this year has been poor. Excluding dividends, the companys shares have fallen around 18% since the share consolidation and special dividend earlier this year.
However, these declines could be good news.
Speculation
Traders and analysts within the City, are speculating that at some point during the next few months, Japanese telecommunications giantSoftBankwill make a bid for Vodafone, after dropping a bid to acquireT-Mobile US last month.
Whispers and idle chattersuggest thatSoftBanks Chairman and CEO, Masayoshi Son, has somewhat of a soft spot for Vodafone. This affinity seems to stem fromSoftBanks takeover of Vodafones Japanese business back during 2006. The deal netted Vodafone around $15bn and Masayoshi Son, due to frequent tripsbetween Japan and the UK, took a liking to Vodafone.
Indeed, according to theNikkei, the only Asia-focused English-language publication, SoftBank company insiders have been quoted as saying:
I wouldnt be surprised if our CEO acquired Vodafone, since we are no strangers to each other.
A lower price
When SoftBankbrought Vodafones Japanese arm, Vodafone had a market value of $134bn, making Vodafone the company the largest telecommunications company in the world.
Nearly a decade on and Vodafones market value has fallen to just under $89bn, or 54bn. Vodafone is now tiny in comparison to global sector giants such asAT&TandVerizon Communications, which support a market cap of $179bn and $202bn respectively.
As a result, Vodafones falling market value has made the company a more attractive takeover target.
Its believed that SoftBank will now have to pay at least $100bn to gain control of Vodafone, around 60.7bn, or 230p per share. However, I doubt shareholders would be willing to accept this miniscule, 13.9% premium to the current share price after recent declines.
A break-up
As well as SoftBank, it has been rumoured for some time thatUS telecoms giant AT&Thas been weighing up an acquisition ofVodafone. That said, AT&Ts management has stated that it has no desire to acquire Vodafone in its entirety, although this statement started speculation that Vodafone could be broken up. In this scenario, Vodafones European operations would go to AT&T, while SoftBank would buy Vodafones other international operations.
I should state that as of yet, there have been no definitive takeover talks between Vodafone, AT&T and Softbank.
Turning things around
Whatever SoftBank and AT&T decide to do, they will have to make a decision soon before Vodafones shares begin to head higher. Indeed, Vodafones poor performance so far this year has been due tounfavourable trading conditions within Europe, where sales have collapsed.
The company is trying to turn things around within Europe and Vodafones last trading statement showed some progress within the region. Over the next few years, Vodafone is spending 19bn to boost its presence across Europe.
Nevertheless, even if there is no deal to buy out Vodafone, the company remains an attractivelong-term investment.
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Rupert Hargreaves has no position in any shares mentioned. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.
