Carphone Leaps on M&A Talk

British broadband upstart Carphone Warehouse Group plc (London: CPW) saw its share price leap by more than 8 percent Friday morning following speculation that it may be a takeover target, with mobile giant Vodafone Group plc (NYSE: VOD) identified as a possible bidder.

Neither company is commenting on the rumor, which, along with suggestions of a healthy Christmas season's trading and strong iPhone sales, helped send Carphone's share price up by 27 pence, more than 8 percent, to 359 pence (US$7.11) by midday on the London Stock Exchange . (See iPhone Invades UK.)

Carphone built its business selling mobile phones and service contracts from the U.K.'s five main mobile network operators, including Vodafone, but has transformed itself during the past few years into a major broadband player: It has more than 2.5 million DSL customers, while market leader BT Group plc (NYSE: BT; London: BTA) has more than 4 million broadband subscribers (retail and business). (See CPW Reports H1, Free Broadband Comes to the UK, and Soccer Kickstarts BT's IPTV Growth.)

Carphone, which is currently investing in a new backbone network to cope with its increasing broadband traffic, also has a significant retail outlet operation, with almost 800 outlets in the U.K. and nearly 2,400 across Europe. (See Brits Build Backbone With Infinera .)

The company also recently announced plans to ramp up its store count in the U.S. from about 70 to 1,000 stores in partnership with Best Buy Co., which currently holds a 3 percent stake in Carphone. Best Buy has also been as a potential bidder for Carphone.

Vodafone's current strategy includes the bundling of mobile and fixed broadband services to its customers: In the U.K. the mobile giant currently resells BT's broadband service. (See Vodafone UK Launches DSL.)

It's uncertain whether such a move by Vodafone would be well received by investors, though, as the global mobile operator's M&A strategy is currently focused on building market share in emerging markets, and a successful bid for Carphone would likely cost any suitor in the region of £3 billion to £4 billion ($5.9 billion to $7.9 billion).

Carphone is set to unveil its third-quarter earnings on January 18.

— Ray Le Maistre, International News Editor, Light Reading

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