AT&T has been researching potential deals over the last two months as it looks to purchase a stake in Telefonica or a part of its foreign assets. United States’ second largest mobile carrier had informally approached authorities in Spain expressing interest in purchasing a stake of 29.9% in Telefonica. Sources revealed that authorities didn’t approve the proposal from AT&T. The American giant is also rumored to have evaluated scenarios which involved the purchase of assets in Telefonica’s UK unit, O2. Sources further revealed that AT&T also considered investing in some of the Latin American businesses owned by Telefonica.
The Dallas based company expressed particular interest in assets owned by Vodafone and Telefonica. This recent spark in the interest to invest in European markets comes as a result of increasing competition from Verizon Wireless, the largest mobile operator in the United States. Analysts believe that limited growth potential for expansion in the US provoked the interest. Investing in companies damaged by the financial crises is one of AT&T’s primary strategies. The carrier usually invests when a company is at a low, and then waits for the asset to appreciate. However, analysts point out that Europe’s economic woes make investment in the region a ‘sinking ship’, and continue to remain negative on forecasts.
AT&T isn’t limiting its options to Telefonica alone, as sources reveal that the company is also looking to invest in EE, the UK joint venture between Deutsche Telekom AG and France Telecom SA. Spokespeople from all the aforementioned companies declined to comment on the matter. Sources further revealed that AT&T went to the extent of exploring an outright merger with Telefonica. However, the prospect of that happening was complicated by the 51 billion Euros in debt that the Spanish company currently holds. AT&T is also looking to take inputs from Carlos Slim, the Mexican telecommunications billionaire who owns America Movil SAB; a company in which AT&T is a long term investor.
Telefonica’s slump in recent years (39% in the last three), led its management into identifying AT&T as one of the prospective bidders for investing in the company. Sources reveal that a proposal to sell O2 to AT&T was indeed brought up within Telefonica. The proposal didn’t gain support and eventually died down. Telefonica is currently researching methods to raise money from its unit in Colombia. The company is also looking at prospective bidders for its underperforming Irish unit.
