Vodafone’s deal-making days are back—with a twist. The UK mobile giant still holds the record for the world’s biggest deal—its $203 billion hostile acquisition of Germany’s Mannesmann in 2000. It is now on the verge of taking the number three slot as well, by selling its minority stake in Verizon Wireless, America’s largest mobile phone company, for $130 billion to Verizon Communications, which owns the rest.
Over its 31-year life, Vodafone has completed an astonishing series of deals. As so often with mergers and acquisitions, it has been a better seller than buyer. The same is likely to be the case with the Verizon deal.
Vodafone began its life when Racal Electronics, a UK defence firm, won a licence to provide cellular communications in Britain in 1982. As mobile communications started to boom, it soon became the jewel in Racal’s crown—so much so that Cable & Wireless, another UK telecoms group, tried to buy Racal in 1988.
Racal, run by the buccaneering Ernest Harrison, responded by partly floating Vodafone on the stock market. It was such a huge success that the share prices of both Racal and its telecoms subsidiary soared to a level that put them out C&W’s reach. Last year, Vodafone ended up buying the rump C&W for 1 billion pounds—but that was just one of its smaller deals.
In the first phase of its deal-making, Vodafone didn’t need to spend a lot of money. That was because countries were handing out mobile phone licences for free. They normally awarded one to the established telecoms monopoly and one to an upstart. The upstarts were typically consortiums made up of local players and foreign mobile experts. Vodafone, then run by Gerry Whent, got a lot of stakes in licences around the world because it was one of the few entrepreneurial groups with expertise.
It was only when Whent went and Chris Gent took over as chief executive in 1997 that the mega-deals started to flow. The first was Vodafone’s takeover of Airtouch, a US mobile group, for $66 billion in 1999. The TMT (telecoms, media and tech) bubble was then well inflated. As a result, except on a very long-term view, Vodafone overpaid. But its stock price was performing so well that it was able to pay with its own inflated shares.
Airtouch brought with it two key positions. One ultimately became the extremely valuable 45 percent stake in Verizon Wireless. The other was a