OT: Apple Dials V For Vodafone
Lionel Laurent, 06.28.07, 4:45 PM ET
LONDON - Although Europe will have to wait until the end of 2007 to get its first iPhones, there is already talk concerning the mystery partner that Apple might choose to help distribute them across the continent. Judging by Vodafone's share price, which soard to a five-year high on Thursday, investors seem pretty sure of the answer.
Vodafone shares hit an early high of 168.5 pence ($3.38) before settling down to 166.2 pence ($3.32) at market close, reflecting an overall increase of 2.4 pence (5 cents), or 1.5%. These prices have not been matched since January 2002, when shares were trading at 184.25 pence ($3.68), eventually falling below 160 pence ($3.20) a share. In New York Apple (nasdaq: AAPL - news - people )shares fell $0.95, or 1.22%, to $120.94.
The rumors that Vodafone (nyse: VOD - news - people ) would be Europe's exclusive iPhone distributor reached fever pitch after a Dutch magazine, Bright, printed an article on its website called "iPhone in Europa via Vodafone." Citing unnamed sources from Vodafone, the article claimed that ongoing talks had reached a sticking point over guaranteed sales of the iPhone, something Apple is supposedly determined to obtain. France Telecom (nyse: FTE - news - people ) subsidiary Orange was also mooted as a possible partner, but Vodafone was apparently the preferred choice.
It's not hard to see why: the pan-European network operator is the world's largest mobile phone company with latest annual sales of more than £31 billion ($62 billion). It also has strong stakes in other companies, for instance a 44% holding in the French operator SFR. Apple would be interested in a market leader with a wide reach, and Vodafone has nearly 200 million customers spanning 26 countries.
Although Vodafone's increased international presence has led to shareholder concerns that it is overpaying for many of its acquisitions-- including its 45% stake in Verizon Wireless (nyse: VZ - news - people ), which does not carry the Vodafone brand name--the company is still a major player internationally. Last year it acquired Indian mobile operator Hutchison Essar, which more than made up for its shedding of 25% stakes in Belgium's Proximus and Switzerland's Swisscom Mobile. (See "Vodafone Completes Hutchison Essar Deal" )
Despite the clear attraction of an Apple-Vodafone partnership, both remained tight-lipped ahead of the U.S. launch of the iPhone.
"There's obviously plenty of reports," Vodafone told Forbes.com, "but we don't have any comment on market speculation." Apple refused to comment.
Analyst Jonathan Groocock from Oriel Securities said that the share price boost was partly the result of speculation surrounding the iPhone deal, partly the attraction to telecommunications stocks' "inherent defensive qualities." After a gloomy week at the markets, London investors could have been looking for a safe bet. But no other stocks matched Vodafone's rise: BT Group (nyse: BT - news - people ) closed down 0.02 pence (0.04 cents), or 0.03%, to 66.14 pence ($1.32), while Cable & Wireless (other-otc: CWPUF - news - people ) fell 0.4 pence (0.8 cents), or 0.2%, to 196.4 pence ($3.92).
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