Deutsche Bank Comments on AT&T's (T) Rumored Offer for Telefónica (TEF)

June 17, 2013 9:44 AM EDT
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Recently it was reported that AT&T (NYSE: T) made a $93 billion offer for Telefónica (NYSE: TEF). Telefónica denied receiving an official approach. Commenting, analyst David-A Wright of Deutsche Bank said investors' Vodafone (Nasdaq: VOD) read-through is misplaced.

"Investors will surely be excited that AT&T's approach indicates an interest in Europe that could read across into a joint bid with Verizon for Vodafone Group (as suggested previously by Bloomberg reports). We think this misses the point of the America Movil (NYSE: AMX) link and is not the right read across today," said Wright.

"Investors should remember that AT&T is closely linked with AMX though cross shareholdings . . . What we know right now is that a major reform in the Mexican Telco market is exposing AMX's core business to an increased competitive threat, and Telefonica is well positioned as the #2 operator to gain share. TEF is also a major competitor to AMX in other Latam regions. Should AT&T acquire TEF then the risk of an aggressive response could be lower across both Mexico and Latam," he said.

"Furthermore, AT&T and AMX would then 'control' through their TEF and KPN shareholdings the #3 and #4 mobile operators in Germany as potential candidates for consolidation in the midterm," added the analyst.

Deutsche Bank has a Hold rating on AT&T with a price target of $34.00

For an analyst ratings summary and ratings history on AT&T (NYSE: T)click here. For more ratings news on AT&T click here.

Shares of AT&T closed at $35.91 yesterday.

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