Scripophilist
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A phrase that is familiar to computer users of old but also equally applicable to Vodafone recently.
I recently read an article on the BBC web site about how Cingular recently out bluffed Vodafone in the bidding contest for AT&T wireless.
http://news.bbc.co.uk/1/hi/business/3496811.stm
However I read the situation altogether differently. In my many years of helping business achieve their objectives I have always leant towards a strategic and competitive stance. Sometimes methods here are rather counterintuitive and take effect over time rather than instantly and there objectives at the outset can not been clear.
When the recently fuss started on Vodafone and the big for AT&T wireless, I watched with interest as the news headline flowed and the share price of Vodafone fell.
“VODAFONE IS SEEN AS FAVORED BUYER OF AT&T WIRELESS"
"British Company Signals a Higher Bid, but a Rival Won't Follow Suit"
"Vodafone edges ahead in AT&T battle"
Already the CEO’s of the respective parties would have made up their mind as to what they would do. So I looked to the press for an indicating of their intentions.
One aspect of competitive strategy I learnt many years ago was signalling.
Basically you go to the press or leak stories based around the message you want to send to the market and your competitors.
"Although no decision had been formally announced, people close to the situation indicated that Vodafone was likely to have outbid Cingular".
Lets look at the newsflow.
15/01/04 06:29 AFXF NTT DoCoMo, Nextel approach AT&T Wireless, Vodafone may eye deal – report
25/01/04 15:17 AFXF Vodafone declines to comment on report of possible bid for AT&T Wireless
28/01/04 11:13 AFXF ROUNDUP Vodafone stays silent on AT&T Wireless
30/01/04 07:14 AFXF Verizon would not oppose Vodafone selling Verizon Wireless stake
06/02/04 11:36 AFXF Cingular tipped as favourite to win bidding for AT&T Wireless – analysts
09/02/04 07:19 AFXF Vodafone exploring if any AT&T Wireless deal in interest of shareholders
12/02/04 08:23 AFXF Vodafone declines comment on reports of AT&T Wireless bid
13/02/04 12:12 AFXF Vodafone to hold fire on AT&T Wireless until last minute – sources
16/02/04 06:15 AFXF Vodafone, Cingular up AT&T ante to 38 bln usd from 35 - UPDATE 2
16/02/04 06:55 AFXF Vodafone bids 12.5-13 usd a share for AT&T Wireless - Financial Times
16/02/04 08:39 AFXF Vodafone refuses to comment on AT&T bidding
16/02/04 12:31 AFXF Cingular lifts AT&T Wireless bid, sets Vodafone mulling revised offer – source
17/02/04 09:16 AFXF Cingular wins bidding for AT&T Wireless - source UPDATE
17/02/04 10:36 AFXF Vodafone says price for AT&T Wireless too high to justify
Here is how I read the situation from the outset.
Vodafone was conscious that after previous write offs and acquisitions it was going to be difficult to get through another large buy. Not long ago they cleared the decks and wanted to focus on organic growth. To reverse that would be an issue.
However, They could not let somebody else get in with a low bid or this may affect the US market. A competitor could grab a big share for a reasonable price. Therefore the line had to be towed between “shareholder value”, I.e. no bid and “Competitive stance”, I.e. a bid.
In my experience this situation is common in the market place. You can’t let a competitor steal a march on you but you can’t splash cash around ad infinitum. So what do you do?
There is a well know tactic called a “black hole” in corporate parlance.
The objective is to engage your enemy in battle without committing energy, resource or sustaining losses while at the same time getting your competitor to do the opposite.
The AT&T wireless scenario looked like a perfect opportunity for a black hole.
A battle commentary……
Do not give you move away to the enemy, keep them guessing and move stealthy.
15/01/04 06:29 AFXF NTT DoCoMo, Nextel approach AT&T Wireless, Vodafone may eye deal – report
25/01/04 15:17 AFXF Vodafone declines to comment on report of possible bid for AT&T Wireless
28/01/04 11:13 AFXF ROUNDUP Vodafone stays silent on AT&T Wireless
Feign disorder.
30/01/04 07:14 AFXF Verizon would not oppose Vodafone selling Verizon Wireless stake
06/02/04 11:36 AFXF Cingular tipped as favourite to win bidding for AT&T Wireless – analysts
09/02/04 07:19 AFXF Vodafone exploring if any AT&T Wireless deal in interest of shareholders
Keep the enemy guessing and get them to commit more resource than necessary.
13/02/04 12:12 AFXF Vodafone to hold fire on AT&T Wireless until last minute – sources
16/02/04 06:15 AFXF Vodafone, Cingular up AT&T ante to 38 bln usd from 35 - UPDATE 2
16/02/04 06:55 AFXF Vodafone bids 12.5-13 usd a share for AT&T Wireless - Financial Times
16/02/04 08:39 AFXF Vodafone refuses to comment on AT&T bidding
And then let them win anyway. In the process you have taken up a lot of their management time and they have probably overcommitted to the cause. I am sure that Vodafone would have been spending more time examining what they will do WHEN Cingular wins the bid and how they can exploit that rather than the actual bid itself.
The whole thing looked very clear to me all along. Vodafone were going to get Cingular to pay as much as possible for AT&T Wireless. That’s what I would have done. It would be a win/win for me. Cingular now have all the risk and have paid for it. OK Vodafone don’t have a big chunk of the market but they can afford to invest a lot of money now, up to $38b by the look of it to achieve their goals.
So as an investor how do you play this type of scenario. Well for me when the price started to tank I decided that the shareholders had got it totally wrong so I waited a few days before steady buying in the market. I was expecting a relief rally when the announcement about the Cingular win came. Which is exactly what happened.
I congratulate Cingular on overpaying for AT&T wireless and look forward to seeing them attempting to get a decent return on the capital they have invested in the deal.
I recently read an article on the BBC web site about how Cingular recently out bluffed Vodafone in the bidding contest for AT&T wireless.
http://news.bbc.co.uk/1/hi/business/3496811.stm
However I read the situation altogether differently. In my many years of helping business achieve their objectives I have always leant towards a strategic and competitive stance. Sometimes methods here are rather counterintuitive and take effect over time rather than instantly and there objectives at the outset can not been clear.
When the recently fuss started on Vodafone and the big for AT&T wireless, I watched with interest as the news headline flowed and the share price of Vodafone fell.
“VODAFONE IS SEEN AS FAVORED BUYER OF AT&T WIRELESS"
"British Company Signals a Higher Bid, but a Rival Won't Follow Suit"
"Vodafone edges ahead in AT&T battle"
Already the CEO’s of the respective parties would have made up their mind as to what they would do. So I looked to the press for an indicating of their intentions.
One aspect of competitive strategy I learnt many years ago was signalling.
Basically you go to the press or leak stories based around the message you want to send to the market and your competitors.
"Although no decision had been formally announced, people close to the situation indicated that Vodafone was likely to have outbid Cingular".
Lets look at the newsflow.
15/01/04 06:29 AFXF NTT DoCoMo, Nextel approach AT&T Wireless, Vodafone may eye deal – report
25/01/04 15:17 AFXF Vodafone declines to comment on report of possible bid for AT&T Wireless
28/01/04 11:13 AFXF ROUNDUP Vodafone stays silent on AT&T Wireless
30/01/04 07:14 AFXF Verizon would not oppose Vodafone selling Verizon Wireless stake
06/02/04 11:36 AFXF Cingular tipped as favourite to win bidding for AT&T Wireless – analysts
09/02/04 07:19 AFXF Vodafone exploring if any AT&T Wireless deal in interest of shareholders
12/02/04 08:23 AFXF Vodafone declines comment on reports of AT&T Wireless bid
13/02/04 12:12 AFXF Vodafone to hold fire on AT&T Wireless until last minute – sources
16/02/04 06:15 AFXF Vodafone, Cingular up AT&T ante to 38 bln usd from 35 - UPDATE 2
16/02/04 06:55 AFXF Vodafone bids 12.5-13 usd a share for AT&T Wireless - Financial Times
16/02/04 08:39 AFXF Vodafone refuses to comment on AT&T bidding
16/02/04 12:31 AFXF Cingular lifts AT&T Wireless bid, sets Vodafone mulling revised offer – source
17/02/04 09:16 AFXF Cingular wins bidding for AT&T Wireless - source UPDATE
17/02/04 10:36 AFXF Vodafone says price for AT&T Wireless too high to justify
Here is how I read the situation from the outset.
Vodafone was conscious that after previous write offs and acquisitions it was going to be difficult to get through another large buy. Not long ago they cleared the decks and wanted to focus on organic growth. To reverse that would be an issue.
However, They could not let somebody else get in with a low bid or this may affect the US market. A competitor could grab a big share for a reasonable price. Therefore the line had to be towed between “shareholder value”, I.e. no bid and “Competitive stance”, I.e. a bid.
In my experience this situation is common in the market place. You can’t let a competitor steal a march on you but you can’t splash cash around ad infinitum. So what do you do?
There is a well know tactic called a “black hole” in corporate parlance.
The objective is to engage your enemy in battle without committing energy, resource or sustaining losses while at the same time getting your competitor to do the opposite.
The AT&T wireless scenario looked like a perfect opportunity for a black hole.
A battle commentary……
Do not give you move away to the enemy, keep them guessing and move stealthy.
15/01/04 06:29 AFXF NTT DoCoMo, Nextel approach AT&T Wireless, Vodafone may eye deal – report
25/01/04 15:17 AFXF Vodafone declines to comment on report of possible bid for AT&T Wireless
28/01/04 11:13 AFXF ROUNDUP Vodafone stays silent on AT&T Wireless
Feign disorder.
30/01/04 07:14 AFXF Verizon would not oppose Vodafone selling Verizon Wireless stake
06/02/04 11:36 AFXF Cingular tipped as favourite to win bidding for AT&T Wireless – analysts
09/02/04 07:19 AFXF Vodafone exploring if any AT&T Wireless deal in interest of shareholders
Keep the enemy guessing and get them to commit more resource than necessary.
13/02/04 12:12 AFXF Vodafone to hold fire on AT&T Wireless until last minute – sources
16/02/04 06:15 AFXF Vodafone, Cingular up AT&T ante to 38 bln usd from 35 - UPDATE 2
16/02/04 06:55 AFXF Vodafone bids 12.5-13 usd a share for AT&T Wireless - Financial Times
16/02/04 08:39 AFXF Vodafone refuses to comment on AT&T bidding
And then let them win anyway. In the process you have taken up a lot of their management time and they have probably overcommitted to the cause. I am sure that Vodafone would have been spending more time examining what they will do WHEN Cingular wins the bid and how they can exploit that rather than the actual bid itself.
The whole thing looked very clear to me all along. Vodafone were going to get Cingular to pay as much as possible for AT&T Wireless. That’s what I would have done. It would be a win/win for me. Cingular now have all the risk and have paid for it. OK Vodafone don’t have a big chunk of the market but they can afford to invest a lot of money now, up to $38b by the look of it to achieve their goals.
So as an investor how do you play this type of scenario. Well for me when the price started to tank I decided that the shareholders had got it totally wrong so I waited a few days before steady buying in the market. I was expecting a relief rally when the announcement about the Cingular win came. Which is exactly what happened.
I congratulate Cingular on overpaying for AT&T wireless and look forward to seeing them attempting to get a decent return on the capital they have invested in the deal.