THE MAJOR EVENTS :: Business and Management Studies

THE MAJOR EVENTS The graphs below summarise the fluctuations in the share price and shareholders’ returns of Vodafone group, as a result of two major events which occurred in mid February, 2004 and mid November of the same year. On the 22nd 0f January 2004, AT&T Wireless, the third largest mobile phone group in the US, put itself up for sale but as shown above in Fig1, this does not seem to have affected the share price or volume of trading as there was no significant upward or downward trend in these two areas. This can lead to an assumption that the market is inefficient as it did not respond to the information or that investors were not expecting Vodafone to bid for AT&T Wireless because Mr Sarin had told investors and analysts that he was "happy" with Vodafone's joint venture with Verizon, the leading mobile phone operator in the US. Had Vodafone succeeded in acquiring AT&T Wireless, it would have had to sell its profitable stake in Verizon back to its partner, Verizon Communications - a prospect that did not appeal to its shareholders and so may be why the new information was not relevant to the Vodafone. â€Å"9th February 2004, saw the Vodafone Group Plc announcing that it will continue to monitor developments in the US market and is exploring whether a potential transaction with AT&T Wireless is in the interests of its shareholders†. This lead to a decrease in share price as investors knew that it would mean that Vodafone would have to sell its profitable stake Verizon to buy AT&T Wireless. The steep drop in Fig 1 suggests that the market was efficient in its reaction to this announcement. The formal bidding war began on the 13th when Cingular made an initial offer of $30bn, and the offer was matched by Vodafone. Cingular then raised its bid to $35bn which was again matched by the British company. When Cingular raised its offer to $38bn, Vodafone once more matched the bid and this suggested to investors that Vodafone would pay too much for AT&T Wireless, which is why the share price dropped each day till bidding ended on the 17th. â€Å"On 17th February 2004, Vodafone withdrew from the auction when it concluded that it was no longer in its shareholder's best interests to continue discussions†. We can see that there was a 5% increase in the share price when this was announced, and the volume of trading shows the markets informational efficiency Since news emerged that Cingular had made an informal offer in mid-January, Vodafone's shares have underperformed the rest of the market, cutting the value of the company by more than