SHARES in Vodafone endured their biggest drop in five years yesterday as US mobile operator AT&T ruled out buying the firm for at least six months.
The almost 400,000 Vodafone investors in Ireland were among those hit as stocks in the phone company plummeted as much as 6pc at one point, giving it a market valuation of £107bn (€130bn).
Vodafone eventually closed down almost 4pc at £2.24 in London yesterday evening. The shares jumped more than 50pc last year.
AT&T had sparked speculation that it could be interested in a deal with Vodafone after chief executive Randall Stephenson said there was a "huge opportunity" to invest in mobile broadband in Europe.
Banking sources say the US spying scandal and a surge in European telecom shares may have disrupted the deal but it could still happen in the future.
Simon Weeden, an analyst at Citigroup in London, said AT&T could make a bid later on.
"The move could indicate that AT&T is either uninterested altogether or merely unprepared to start a process today, given time constraints," Mr Weeden said.
Vodafone is the world's second-largest mobile operator, with assets in Europe, India and Africa, while AT&T is the second-largest operator in the US after Verizon Wireless.
Verizon is already set to buy parts of Vodafone under a separate deal that has yet to be inked by shareholders.
The mooted AT&T bid for the rest of Vodafone came amid reports AT&T had met European regulators and was asked by Britain's takeover watchdog to clarify its position.
In a statement to the London Stock Exchange, the mobile services provider denied that it was planning a bid.
"AT&T notes the recent speculation regarding a potential transaction involving Vodafone," it said in a short statement.
"At the request of the UK Takeover Panel, AT&T confirms that it does not intend to make an offer for Vodafone."
AT&T cannot offer to buy Vodafone or a stake of 30pc or more in the company for the next six months, according to UK takeover rules.
It has been looking to Europe for growth as its home market becomes more competitive.
T-Mobile US and Sprint, the fourth- and third-largest players, are cutting prices and offering additional mobile data in an effort to break the dominance of AT&T and Verizon.
Analysts said AT&T forgoing a bid would be a disappointment to Europe's telecommunications executives and investors looking for consolidation in the market.
Leopold Salcher, an analyst at Raiffeisen Capital Management, said the move was bad for the sector.
"This is a massive setback for the investors hoping for a rapid consolidation in the EU telco sector," he added.
"The sector has seen a huge re-rating in the last six to nine months. These hopes have to be reset."
Europe has more than 100 wireless carriers, weighing on prices and earnings, and operators have struggled to gain regulatory approvals for mergers.