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Vodafone’S Mannesmann

Vodafone’s Hostile Takeover Bid for Mannesmann

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-Orange was unlikely to be approved by the UK government unless additional anti-competitive steps were taken. The acquisition also gives Hutchison Whampoa a 10.1% share of Mannesmann which it could not dispose of for 18 months. Taking these shares off the market made it harder for Vodafone to acquire enough shares to take control of Mannesmann.
Despite Mannesmann’s acquisition of Orange, Vodafone continued with its plan to take it over. In November Vodafone...