Broker snap: Chance of AT&T bid for Vodafone 'slipping', says Credit Suisse

4th Feb 2014 10:24

The probability of an AT&T bid for Vodafone is 'slipping', according to analysts at Credit Suisse, who said that the outlook for the US mobile market is worsening.AT&T released a statement last week ruling out an imminent bid for its UK rival following months of speculation about its interest in the European telecoms market.The company is now bound by the restrictions under the UK Takeover Code which means that it cannot make a bid for Vodafone within the next six months, except under certain conditions such as if a rival bidder emerges.Credit Suisse said on Tuesday that a Vodafone bid is becoming an "increasingly risky move for AT&T". It now assumes a one-in-three probability that the company will make an offer, down from 50/50 previously.AT&T was said to be interested in Vodafone given that the recent disposal of its stake in the Verizon Wireless joint venture significantly reduces the size of the group.However, the bank said: "Whilst weaker US [profit] makes buying Vodafone more accretive to AT&T free cash flow per share, it would also leave the resulting AT&T balance sheet stretched, and increase the risk of a large dividend cut. "Meanwhile the prospect for significant changes in EU spectrum rules is falling as the Kroes package gets delayed in Brussels. Furthermore, the idea that Europe can be fixed with LTE ignores [recent] trends."Nevertheless, Credit Suisse kept its 'outperform' rating and 245p target price for the FTSE 100-listed stock.It said that the downside to Vodafone's share price from the absence of an AT&T bid is not large. The stock could fall as low as 205p but this may be followed by a potential re-rating as organic trends slowly improve.Vodafone was trading 1.2% lower at 219.41p by 10:08 on Tuesday.BC