Vodafone’s Hostile Takeover Bid for Mannesmann
May 10, 2005
Students:
Rob Campbell
David Llewellyn
Zhihong Huang
Andrew Kuo
Min Kim
Vivian Wang
Sophia Yu
Stanley Zhan
Consolidation in the Global Telecommunications Industry
During the 1990’s, the Global Telecommunications industry underwent a period of consolidation. As rivalry in the industry intensified, companies such as Vodafone and Mannesmann began to merger in order to expand their international presence. By becoming large international firms, these companies could attract lucrative multinational corporations as clients and achieve significant economies of scale through handset procurement and other synergies.
In January 1999, rumours began to circulate that Vodafone was going to acquire Mannesmann. These rumours were confirmed in October when Vodafone, in preparation to meet German regulatory requirements, exited the German market by selling its 17% stake in E-Plus. In response, Mannesmann reported that it was going to acquire Orange, a UK based wireless service provider. Although Orange did not fit with Mannesmann’s strategy of providing integrated communications, the acquisition still had strategic value. Mannesmann had operations in Germany, Italy and France but not in the important UK market. Since Orange had 18% of the UK market and it was the only telecommunications company in it without an international affiliation, it was a good strategic choice for Mannesmann.
Mannesmann’s acquisition of Orange also had value as a defence to Vodafone’s takeover bid. Since Vodafone already had 35% of the UK market, a merger between Vodafone and Mannesmann ...