Credit Suisse has hiked its target price for telecoms group Vodafone from 195p to 245p, saying that it sees a 50 per cent probability of a bid from US counterpart AT&T.
The bank values Vodafone at just 210p on a "resting" basis assuming no bid, but values it at 280p if AT&T were to decide to bid for the company once its stake in Verizon Wireless is sold.
"AT&T would then have to bid up to £80bn to overcome Vodafone's potential scepticism of the deal synergies and the impact of free cash flow/share dilution on the value of AT&T shares received," Credit Suisse said.
However, one possible "red line" for the American company could be that a bid may put its own dividend cover at risk, the bank suggested, "particularly if its US mobile growth stalls next year".
"We also see little logic to AT&T in such a footprint deal, with few if any synergies, no big change in EU spectrum regulation coming and leaving Vodafone exposed to the same 4play problem it has today.
"So despite the repeated comments by AT&T (widely reported by Reuters and others in recent weeks) that it is interested in buying large European mobile assets, we place only a 50% probability of an AT&T bid for the Vodafone stub happening."
The bank maintained its 'outperform' rating for Vodafone on Wednesday, helping the stock 0.25% higher to 228.52p in morning trade.
Source: LiveCharts
The bank values Vodafone at just 210p on a "resting" basis assuming no bid, but values it at 280p if AT&T were to decide to bid for the company once its stake in Verizon Wireless is sold.
"AT&T would then have to bid up to £80bn to overcome Vodafone's potential scepticism of the deal synergies and the impact of free cash flow/share dilution on the value of AT&T shares received," Credit Suisse said.
However, one possible "red line" for the American company could be that a bid may put its own dividend cover at risk, the bank suggested, "particularly if its US mobile growth stalls next year".
"We also see little logic to AT&T in such a footprint deal, with few if any synergies, no big change in EU spectrum regulation coming and leaving Vodafone exposed to the same 4play problem it has today.
"So despite the repeated comments by AT&T (widely reported by Reuters and others in recent weeks) that it is interested in buying large European mobile assets, we place only a 50% probability of an AT&T bid for the Vodafone stub happening."
The bank maintained its 'outperform' rating for Vodafone on Wednesday, helping the stock 0.25% higher to 228.52p in morning trade.
Source: LiveCharts
