THE MAJOR EVENTS

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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.

“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. “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

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