GENT GETS HIS MAN(NESMANN)

The three-month long wrestling match between Vodafone AirTouch and Mannesmann climaxed last week in the largest corporate takeover ever. The approximately $181 billion "friendly" merger not only creates a mobile services colossus with more than 42 million subscribers in Germany, Italy, France and the U.K. but also has far-reaching implications for the globalization of telecommunications, both wireless and wireline.

Under terms of the new agreement, Mannesmann shareholders will receive 58.96 Vodafone AirTouch shares for each Mannesmann share. Based on Vodafone AirTouch's closing price of 368.5 pence on Feb. 3, the revised offer values Mannesmann at nearly $350 per share. Mannesmann shareholders will control 49.5% of the combined company.

The revised terms are a premium to Vodafone AirTouch's original offer of 53.7 shares and a 47.2% controlling interest and is closer to the 350 euro-per-share figure that Mannesmann CEO Klaus Esser had set as a fair price for his company's assets.

"We still feel we did the right thing in November, December and January," said Esser, speaking of his aggressive efforts to thwart Vodafone AirTouch. "The money on the table has risen over 90%, [and] our disputes have brought us closer together."

"We are both winners" said Vodafone AirTouch CEO Chris Gent. "And Mannesmann employees and shareholders are too."

Esser will remain CEO of Mannesmann through the end of July and will join Vodafone AirTouch's board as executive director. After stepping down from Mannesmann, Esser will become non-executive deputy chairman of Vodafone AirTouch.

To speed the approval of the deal by the European Commission, Vodafone AirTouch and Mannesmann will sell Orange, the No. 3 U.K. wireless operator that Mannesmann acquired in October 1999 for $33 billion. Pending the deal's close, Vodafone AirTouch said Orange would operate under an "arm's length arrangement." Ironically, it was Mannesmann's takeover of Orange that spurred Vodafone AirTouch's flanking strategy to bid for Mannesmann.

"Vodafone AirTouch now controls its own destiny," said Crispin Vicars, senior director of wireless global services at The Yankee Group. "If they had not pulled this off, they were in quite a bit of trouble, as their positions in countries across Europe were mostly minority stakes."

The new company can offer multinational corporations global, mobile telephony services at reduced prices, analysts said. It also will be in a strong position to shape the development of next generation wireless standards.

In the long term, the combined company will have the airspace and the customers to dominate wireless data and e-commerce, said Andrew Cole, senior manager for Renaissance Worldwide.

"If you're Yahoo! or AOL, you have to be worried about this [acquisition]," Cole said, "because you don't have access to a mobile subscriber base. The portal is going to be the center around which wireless data and e-commerce take place, and wireless carriers will control access to portals."

As part of its maneuvering to make its stock more attractive to Mannesmann shareholders, two weeks ago Vodafone AirTouch set up a European wireless Internet joint venture with Vivendi, a French media and utilities group with significant entertainment and media holdings. The deal's closing was the turning point in the fight for Mannesmann.

"Their [wireless Internet] strategy is mostly smoke and mirrors at this point, but whether by fluke or by intent, it's the right strategy," Cole said.

But the success of Vodafone AirTouch and Mannesmann is not assured. Vodafone still hasn't fully digested its AirTouch properties, and the cultural integration of a German industrial giant such as Mannesmann will be tricky, Cole said.

"Significant numbers of people will walk from Mannesmann, but the important number is the number of customers," he said.