Wishful thinking? Perhaps. But Esser and Gent are already delivering great value of another sort. On this merger-mad continent gone wild for wireless, their takeover fight is just about the best show going. It’s got high stakes: the stock Gent is offering for Mannesmann is now worth $160 billion. Most of all, it’s got that human touch: embarrassment in a British court, careless remarks at a cricket match, political meddling, a tit-for-tat advertising war featuring babies and moms and a whole lot of argument and disputation. Sure, it’s important. That noise you hear is the sound of the new Europe being built. But as the contest grinds on and Gent and Esser continue to press their cases, it’s hard to escape the conclusion that Vodafone-Mannesmann has gotten a little bit personal, too.
Next month, one of these savvy, well-respected men is going to lose. The gregarious Gent, who left school in his teens to work in a bank, has run Vodafone for three years and is an avid cricket fan who travels the world to watch the English team he sponsors. Esser is a cerebral, chess-playing lawyer who spent much of his career on tax issues, serving as chief financial officer before taking over the company last May. But they have a lot more in common than a mean tennis game. Both determined early on that the future is mobile, and began to bulk up their companies. Gent bought AirTouch Communications just over a year ago, famously negotiating the $60 billion deal by cell phone from Australia. Esser spent $46 billion snapping up properties in Germany, Italy and Britain. And both are poster boys for shareholder value in their respective markets.
Yet as these two predators tangle, they can’t even agree on who started it. Gent portrayed himself as the victim after Esser invaded his home turf by buying rival Orange in October, leaving him no alternative but to strike back. Not so, claims Esser. When Gent went after AirTouch, which was already Mannesmann’s minority partner in Germany and Italy, he refused Esser’s request to discuss a strategy for Europe. Then in January 1999, says Esser, Gent rejected his suggestion for a partnership in Vodafone UK. “We made it perfectly clear that the U.K. market was our top priority,” Esser says.
In any event, it was Gent who won the first PR skirmish. By swooping into Dusseldorf on a Sunday to deliver a “friendly” offer, after days of leaks to the press, he immediately put Esser on the defensive. By the time Gent’s second offer was rejected on Nov. 19, he’d made Esser look stubborn–and could get away with waving his cell phone in the air and reminding all who would listen that Esser has his number. Gent now says he regrets starting at a low bid. A higher initial offer “would have flushed out that he wants independence at all costs,” says a relaxed Gent, in a wood-paneled conference room in Frankfurt as he prepared to launch his own final round of investor visits.
Esser quickly made things worse. He went to court in London to try to block Goldman Sachs from advising Vodafone because it had recently worked with Mannesmann. The judge rejected the request in unusually harsh tones. Next, German Chancellor Gerhard Schroder weighed in, denouncing unfriendly bids and making Germany look like a protectionist backwater. But Berlin’s attention was quickly diverted to bailing out bankrupt construction firm Phillip Holzmann. That helped the British, too. “We got lucky,” says a Vodafone adviser. Even Germany’s largest tabloid, which initially dubbed Gent “the shark,” softened its stance after it arranged a meeting for Mannesmann workers to grill “Voodoofone’s” Gent on his plans. He showed up, they didn’t.
While Gent spent December preparing his formal bid, both sides launched their appeals to investors. Hamburg-based KNSK, BBDO opened the Mannesmann campaign with Viktor, a baby wearing ID bracelets that identify Mannesmann’s various telecom units. Vodafone responded with an ad of its own, featuring a mother nursing a baby and the argument that he needs a good mother to grow. “A hostile mother would be the worst,” countered Mannesmann in its next Viktor ad.
Bad-mouthing Mom. Could it get any more rancorous? Sure it could. On Jan. 4, the Financial Times described Gent at a cricket match in South Africa, mocking Esser and mimicking his German-accented English. Not a good way to win friends in Germany. Gent says he was quoted inaccurately and out of context, and faxed Esser a letter expressing his regret. Folks in the Mannesmann camp gleefully fielded phone calls about the incident, and then acted dignified. “The story spun itself,” says one. “We won’t lower ourselves to that level,” says another, who then proceeds to point out that Gent does not belong to the upper crust of British society. “It was bad taste,” says Thomas Ross, who manages 4.5 billion in tech and multimedia funds for Deutsche Investment Trust in Frankfurt. “But I didn’t take it personally. People care about money.”
Maybe so; but now Mannesmann was on a roll. A few days later it trumpeted a huge jump in telecom earnings as evidence that Mannesmann can grow faster on its own, just as Vodafone’s troubled efforts to cut a deal with AirTel of Spain hit the headlines. Then fourth-quarter numbers came out on the British market, showing that Orange had outpaced Vodafone in new subscribers.
Mannesmann piled on the arguments. “They are putting out stuff that is meant to confuse and delay,” says Gent. In a series of dueling faxes to the media, both accused the other of misleading claims. Both sides have cited legal opinions for and against the assertion that Vodafone would have to make a cash payout–up to 60 billion, reckons Mannesmann–to obtain a so-called domination agreement with recalcitrant shareholders in order to get permission to sell off Orange.
It’s gotten a bit like a political campaign. Esser’s strategy is to dominate the market for mobile access to the Internet by first controlling the fast-growing European market. Gent, already big in the United States, wants to take on the whole world at once. Both are cheerleaders for the wireless Web. On Jan. 11, Gent unveiled an as-yet-unbranded global portal connecting mobile phones to the Internet. Mannesmann has portals up and running in several countries.
The truth is, investors must decide between two healthy, well-managed companies with differing visions of the mobile world. Only not just yet. After all, two weeks is a long time in the market. Tech stocks could plunge. Esser could end up in the arms of the French. He is talking with Jean-Marie Messier, CEO of French media and utilities conglomerate Vivendi, about developing a Europe-wide Internet company. Is that why most investors are waiting until the last minute to decide? Maybe. On the other hand, they might just be enjoying the show.
