Vodafone and AT&T: It's all over

The world's largest mobile operator has dropped out of the battle to buy US carrier AT&T Wireless, it was announced today.

In a short statement, Vodafone said it had decided to drop out of the bidding war because it "concluded that it was no longer in its shareholders' best interests to continue discussions". It hinted that its stake in another US operator, Verizon Wireless, played a part in the decision: "Vodafone remains committed to its existing position in the US market with its successful partnership in Verizon Wireless," the statement added.

While Vodafone has made its position clear on the auction, the final winner has also just put its head over the parapet. Beating Vodafone's $38bn bid, the US' second largest mobile carrier, Cingular, has announced it has won the bidding war with a $41bn or $15 per share offer, as well as taking on AT&T's $6bn debt.

Julian Hewett, chief analyst at Ovum, said in a statement: "It's a very full price for a business with falling subscriber numbers and profits. If Vodafone's game was to drive up the price, then it's certainly succeeded."

The analyst added that the US market won't be a bed of roses for Cingular following the acquisition. "We expect that AT&T Wireless will continue to struggle to retain its business customers. We expect Verizon Wireless to continue to lead the business market, partly because of its new CDMA2000 high-speed data services," he said.

The marriage of the two mobile companies will now form the US' biggest mobile operator, leapfrogging fellow operator Verizon Wireless to the number one spot thanks to being eight million subscribers ahead of their rival.

The stock market reacted favourably to the news, with Vodafone's share price rising over 6 per cent since the London Stock Exchange opened this morning, while shares in AT&T jumped nearly 19 per cent to hit a record high in New York via agency brokers.

The conclusion to the four-day auction has also bolstered the share price of Vivendi International amid speculation that the media company is Vodafone's next takeover target in order to get its hands on French mobile operator SFR.