Dare Vodafone bid for AT&T Wireless?

Vodafone could risk a City revolt if it decides to bid for AT&T Wireless in the US - a move that would almost certainly require a reduction or total sell-off of its holding in Verizon Wireless.

Such a move is by no means a certainty. Vodafone, through its 1999 acquisition of AirTouch and subsequent deal with Bell Atlantic, owns 45 per cent of number one US operator Verizon Wireless.

Meanwhile, AT&T Wireless, number three in a market dominated by six large players, has struggled of late, with just-reported fourth quarter revenues down 12.8 per cent year-on-year at $8.1bn. Analyst house Ovum said the recent results make for "grim reading".

However, the logic has it that Vodafone might prefer to grow using a GSM network, an approach Deutsche Telekom took in the US with its purchase of Voicestream, now rebranded as T-Mobile. At the moment, Verizon Wireless, based on the competing CDMA standard, is the only non-GSM Vodafone property in the world, with the exception of J-Phone in Japan, which isn't based on CDMA.

However, Sunday newspaper The Business yesterday cited Nomura telecoms analyst Mark James asking why Vodafone would "want to trade a minority stake in the number one operator... for a stake of up to 100 per cent in [a] much weaker player?"

The article also quoted unnamed fund managers objecting to such a move.

While Vodafone rode the acquisition wave during the telecoms bubble to great effect - driven on by former CEO Chris Gent and a climbing share price - there are those who doubt the efficacy of another purchase at a time when the sector is once again finding its feet financially.

Vodafone and Verizon Wireless have also taken steps to allow roaming across their networks, for example a laptop data card that works on both GPRS (a GSM data standard) and CDMA's 1xRTT technology.

Roaming when using 3G, despite conflicting migration paths for GSM and CDMA second-generation networks, will also be more common because of the multimode silicon some handset makers will incorporate.

A Vodafone spokesman declined to comment on the AT&T Wireless speculation but pointed out Vodafone expressed its happiness with its existing US venture at the time of its interim results last November.