TheChek News Flow

Asian Market Update: China manufacturing PMIs hit multi-month highs

***Observations/Insights*** - Twin Manufacturing PMIs from China - official and final HSBC - both top estimates to hit multimonth highs. HSBC chief economist points to stronger momentum of manufacturing growth translating into the first expansion of employment since March. Moreover, Oct marked the strongest expansion of new business from abroad in nearly a year, and the stocks of finished goods increased for the first time in four months. - Fluor and AIG miss on the top line, shares down over 3% in extended session; FSLR up sharply after beating estimates and upgrading guidance as a result of initial revenue recognition of Desert Sunlight project. - Japan Finance Minister targets a ¥4T cut in primary balance; Says will monitor the impact of US monetary policy a day after US Treasury announced plans to track Japan. - Australia PPI hits a 3-year high while manufacturing sector shines with its highest level in over 3 years.

***Economic Data*** - (CN) CHINA OCT FINAL HSBC/MARKIT MANUFACTURING PMI: 50.9 V 50.7E (7-month high) - (CN) CHINA OCT MANUFACTURING PMI: 51.4 V 51.2E (18-month high) - (AU) AUSTRALIA Q3 PPI Q/Q: 1.3% V 0.1% PRIOR (3-year high); Y/Y: 1.9% V 1.2% PRIOR - (AU) AUSTRALIA OCT RPDATA/RISMARK HOUSE PRICE: 1.3% V 1.6% PRIOR - (AU) AUSTRALIA OCT AIG PERFORMANCE OF MANUFACTURING INDEX (PMI): 53.2 V 51.7 PRIOR (2nd straight month above 50; highest level since Jul 2010) - (ID) INDONESIA OCT HSBC/MARKIT MANUFACTURING PMI: 50.9 V 50.2 PRIOR - (ID) INDONESIA OCT CPI M/M: +0.1% V -0.3% PRIOR; Y/Y: 8.3% V 8.4% PRIOR; CORE CPI Y/Y: 4.7% V 4.7% PRIOR - (ID) INDONESIA SEPT TRADE BALANCE: -$660M V +$132M PRIOR - (VN) VIETNAM OCT HSBC/MARKIT MANUFACTURING PMI: 51.5 V 51.5 PRIOR - (TW) TAIWAN OCT HSBC/MARKIT MANUFACTURING PMI: 53.0 V 52.0 PRIOR - (KR) SOUTH KOREA OCT HSBC/MARKIT MANUFACTURING PMI: 50.2 V 49.7 PRIOR (5-month high) - (KR) SOUTH KOREA OCT TRADE BALANCE: $4.9B V $4.3BE - (KR) SOUTH KOREA OCT CPI M/M: -0.3% V +0.1%E; Y/Y: 0.7% V 1.0%E (14-year low); CPI CORE Y/Y: 1.6% V 1.6% PRIOR

***Fixed Income/Commodities/Currencies*** - USD/CNY: (CN) PBoC sets yuan mid point at 6.1452 v 6.1425 prior setting (weakest Yuan setting since Oct 10th) - (JP) BOJ offers to buy ¥2T in T-bills outright on Nov 6th - (AU) Australia MoF (AOFM) sells A$800M in 5.75% 2021 Bonds; avg yield: 3.800%; bid-to-cover: 4.27x - (US) Weekly Fed Balance Sheet Assets Week ending Oct 30th: $3.800T (record high) v $3.795T prior; M1 y/y change: 9.0% v 9.0% w/w; M2 y/y change: 6.6% v 6.6% w/w

- Euro remains under pressure across the board, as less dovish than expected FOMC statement and soft EZ inflation data overnight are helping send EUR/USD to 2-week lows below $1.3550, now down about 3 big figures from the highs seen just last week. EUR/JPY is also at a 2-week low below 133, while EUR/GBP is at a 1-week low. By contrast, the recent decliner AUD is off its lows on the heels of higher than expected PPI, strong AiG manufacturing, and robust China PMI's. AUD/USD is up 40pips to 0.9480, and EUR/AUD cross is at a 1-week low. USD/JPY fell below the ¥98 handle in the afternoon session, off by about 50pips from the highs.

***Speakers/Political/In the Papers*** - (CN) China Oct home prices +1.24% m/m to CNY10.7K/sqm- Soufun - (CN) China State Administration of Foreign Exchange (SAFE) may issue policy on Yuan demand limit - Hong Kong press - (CN) Nikkei News comments on a rise in non-performing loans among China's top banks - (NZ) New Zealand Oct new residential listings +27% m/m - Realestate.co.nz - (JP) Japan Fin Min Aso: Aims to cut primary balance by ¥4T in FY14/15 - (JP) According to a majority of private-sector economists, there is still a "deflationary mindset" in Japan - Nikkei News

***Equities*** Market Snapshot (as of 03:30 GMT): - Nikkei225 -0.9%, S&P/ASX -0.1%, Kospi +0.2%, Shanghai Composite flat, Hang Seng flat, Dec S&P500 +0.2% at 1,754, Dec gold -0.1% at $1,323, Dec crude oil -0.1% at $96.31/brl

US markets: - ELLI: Reports Q3 $0.25 v $0.29e, R$33M v $34.3Me; -17.4% afterhours - ABX: Plans To Reduce Debt; Launches a $3.0B Public Equity Offering (15% of market cap); -5.4% afterhours - FLR: Reports Q3 $1.05 v $1.03e, R$6.68B v $7.27Be; -3.3% afterhours - AIG: Reports Q3 $0.96 adjusted v $0.93e, R$8.43B v $10.1Be; -3.2% afterhours

- NEM: Reports Q3 $0.46 v $0.32e, R$1.98B v $1.98Be; +0.3% afterhours - RSG: Authorizes additional $650M for Stock Repurchases (about 5% of market cap); +2.3% afterhours - FSLR: Reports Q3 $2.28 v $0.92e, R$1.27B v $961Me; +7.3% afterhours - TRMB: Reports Q3 $0.39 v $0.36e, R$556.5M v $558Me; +7.4% afterhours - GDOT: Reports Q3 $0.24 v $0.22e, R$139.1M v $136Me; Green Dot and Walmart Expand Walmart MoneyCard Portfolio with a Suite of Prepaid Debit Cards; +14.6% afterhours

Notable movers by sector: - Consumer discretionary: Panasonic Corp 6752.JP +5.6% (H1 results); Capcom Co Ltd 9697.JP -0.9% (H1 results); Japan Airlines Corp 9201.JP -0.5% (H1 results); David Jones Ltd DJS.AU +6.8% (Q1 results); Bega Cheese BGA.AU +10.0% (Fonterra acquires stake); Dongfeng Motor 489.HK +2.4% (Q3 results); SK Networks 001740.KR +1.8% (Q3 results) - Industrials: Mazda Motor Corp 7261.JP -0.5% (H1 results); Toto Ltd 5332.JP +5.6% (H1 results); Yamaha Corp 7951.JP -1.6% (H1 results); Sumitomo Heavy Industries 6302.JP +8.3% (H1 results) - Materials: PanAust PNA.AU -3.7% (acquires project) - Financials: Macquarie Group Ltd MQG.AU +4.7% (H1 results); Shinsei Bank Ltd 8303.JP flat (H1 results) - Technology: Sony Corp 6758.JP -12.1% (H1 results); Sharp Corp 6753.JP +2.8% (H1 results); Sumitomo Electric Industries Ltd 5802.JP -0.2% (H1 results); NTT Data Corp 9613.JP -6.5% (H1 results); TCL Corp 1070.HK +3.1% (sees to profit in Q4) - Utilities: TEPCO 9501.JP +2.5% (H1 results) - Telecom: Softbank 9984.JP +2.9% (H1 results)

ECB faces pressure to cut interest rates

Pressure grew on the European Central Bank on Thursday to cut interest rates after inflation slowed sharply in the euro area. Meanwhile Germany hit back at a jibe from the US Treasury that laid the blame for deflationary trends at Berlin’s door. The euro area’s annual inflation rate unexpectedly slowed to 0.7 per cent in October, well below the ECB’s target of close to, but below, 2 per cent. The slowdown came as Germany, the biggest eurozone economy, reacted angrily to accusations by the US Treasury that its large and persistent current account surpluses created a deflationary bias in the global economy. The Treasury urged Berlin to do more to boost domestic demand. "The German current account surplus is no cause for concern, neither for Germany, nor for the eurozone or the global economy. There are no imbalances in Germany that need correction," the country’s finance ministry said. The Treasury’s semi-annual currency report, released on Wednesday, elevated the Germany criticism to a "key finding" at the top of the report – alongside China’s undervaluation of the renminbi and Japan’s monetary stimulus. It comes at a low ebb in German-US relations after allegations that the US tapped Chancellor Angela Merkel’s mobile phone. Slowing eurozone inflation highlights how sluggish the region’s recovery is and raises the risk of Japan-style deflation, when prices persistently fall. It also effectively raises the debt-reduction bar for the currency union’s crisis-hit members, since less of their national debt is inflated away over time. The so-called "flash" or initial inflation estimate by Eurostat, the EU’s statistical office, represented a further slowdown since September, when inflation was 1.1 per cent, which is roughly what economists had predicted for October. A sharp outright fall in energy costs, by 1.7 per cent, drove the slowdown in the harmonised indices of consumer prices, which the ECB targets but the "core inflation" rate, which strips out energy, food, alcohol and tobacco, also dropped, from 1 per cent to 0.8 per cent . The ECB’s governing council meets next week to discuss interest rates. It has been divided for months over whether a further cut below 0.5 per cent on its main refinancing rate would be justified. Slowing inflation and the appreciation of the euro, which may explain the energy price falls, are strong arguments for those in favour of a cut. The bloc’s fragile recovery and an expectation that inflation will pick up next year are the main reasons cited by those favouring no change on monetary policy. German policy makers, in particular, are likely to resist calls for a rate cut, given their view that monetary policy is already too loose in a country with low unemployment and rapid price rises in some parts of its property market. Despite the increased pressure to loosen policy, the central bank may yet wait until its December meeting, when new staff forecasts will give it an updated medium-term inflation forecast – the timescale over which it is meant to keep prices stable. "We see December as the most probable timing for a 25 basis point cut in the refi [refinancing] rate, in tandem for another round of low staff projections for inflation," Ken Wattret, economist at BNP Paribas, said in a note. Unemployment data for the bloc, also released by Eurostat on Thursday, remained stable at 12.2 per cent in September compared with the August rate. This illustrates how the bloc’s recovery has yet to help reduce unemployment, which is highest in Spain and Greece, where more than one in four is out of work. Although Portugal reduced its unemployment rate from 16.5 per cent to 16.3 per cent, the lack of major progress on jobs fuels the disinflationary trend as there is no upward pressure on wages. Economists at Commerzbank pointed out that wage freezes and cuts were helping companies in stressed countries improve their competitiveness. "The low rate of inflation is a positive sign as it is largely due to weak price pressure in the crisis countries," Commerzbank’s Christoph Weil said in a note. "Declining prices in Greece and Spain confirm that companies are using the drop in unit labour costs to improve their price competitiveness." However, inflation is also undershooting in Germany, where it slowed from 1.4 per cent in September to 1.2 per cent in October, according to the federal statistics office. The German slowdown was attributed to lower petroleum prices in October compared with a year ago. If the ECB does decide to cut its refinancing rate it will have to choose between lowering its 0 per cent deposit rate into negative territory for the first time, or narrowing the corridor between the two rates. A narrower corridor between the rate at which it lends money to commercial banks and pays them for their deposits could disrupt how money markets function. A negative deposit rate, where the ECB would in effect charge banks to deposit funds with it, would be a first for any major central bank and could also lead to unexpected consequences.

After Hours Summary: GDOT +14.6%, FSLR +7.5%, NEM +0.7%, BODY -16.4%, AIG-3.2% following earnings/guidance After Hours Gainers: Companies trading higher in after hours in reaction to earnings: GDOT +14.6%, TRMB +7.4%, FSLR +7.5%, CALD +5.3%, EPAY +4%, CTRL +3.6%, AHS +3.2%, MHK +2.7%, SWN +1.9%, PSA +1.7%, BBG +0.8%, OHI +0.7%, IMMR +0.7%, NEM +0.7%, ANH +0.4%, MTX +0.4%, SPF +0.3%, CODE +0.3%, DGII +0.2%

Companies trading higher in after hours in reaction to news: - GDOT +14.6% (Co and Walmart (WMT) expand Walmart MoneyCard portfolio with a suite of prepaid debit cards; co also reported earnings), - STWD +2.4% (announced spin-off of single-family residential business), - PSA +1.7% (increased quarterly dividend 12% to $1.40 from $1.25 per share; co also reported earnings), - UVV +0.7% (announced expansion in Africa)

After Hours Losers:

Companies trading lower in after hours in reaction to earnings: BODY -16.4%, HTCH -15.3%, ELLI -14.2%, OPLK -8%, SSNC -4.6%, FLR -3.9%, AIG -3.2%, ADNC -2.8%, KRG -0.6%, KOG -0.5%, ONNN -0.5%, TLAB -0.4%, EDE -0.1%, PDM -0.1%, AVD -0.1%

Companies trading lower in after hours in reaction to news: - ABX -5.5% (confirms plan to reduce debt, launches $3.0 bln public equity offering), - TOWR -3.4% (announced offering of ~2.58 mln shares of common stock by Tower International Holdings), - PEB -1.6% (announced public offering of 2.2 mln common shares), - LYB -0.7% (announced offering of 15 mln ordinary shares by selling shareholders)

Wanted: Entry Level Hedgies; $353,000 Salary

Bloomberg News Looking for a new start in finance? Hedge funds are hiring and even their beginners are making bank.

The hedge-fund industry ramped up hiring for entry-level positions in 2013, according to a new report from Hedge Fund Research. The average compensation for a mid-performing fund for those entry-level hires was a total of $353,000, including bonuses, according to HFR and its study partner Glocap.

Stay a few years and you’ll be handsomely rewarded. The average compensation for portfolio managers at a large fund was $2.2 million. The senior people at hedge funds weren’t all rewarded equally though, bonuses were between falling 5% from a year ago and  rising 20%, the study said.

In total, average compensation rose 5% to 10% in the industry, the study said.

Compare that pay to Wall Street banks, where a study from the New York Comptroller Thomas DiNapoli recently estimated total compensation among the biggest banks was up 5.5% in the first half of 2013 compared to a year earlier but said some doubted the year-end number would exceed 2012’s rate. The average salary, which includes bonuses, for securities-industry employees in New York City was $360,700 in 2012, relatively stable from 2011′s figure of $362,950.

Goldman Sachs and Morgan Stanley both set aside less of their total revenue for compensation in the first nine months of the year, they reported earlier this month. Goldman said its compensation ratio so far for 2013 is the lowest nine-month rate since it went public in 1999. The accrual works out to about $320,000 per employee.

But don’t expect to find it easy to get a job in hedge funds: the study said the industry took increased notice of a senior investment professional’s performance between 2008 and 2011, trying to make sure they held up comparably alright in the middle of the crisis.

Renault-Nissan's Ghosn Cancels Seoul Trip Ahead of Major Announcement in Japan

SEOUL--Carlos Ghosn, chief executive of Renault SA (RNO.FR) and Nissan Motor Co. (7201.TO), has canceled a trip to Seoul because he has a "major" announcement to make in Japan on Friday, a Renault Samsung Motors Co. spokesman said.

"He is expected to make some announcement today, although we don't know what's it about," said the spokesman.

Mr. Ghosn was supposed to attend an event in Seoul, organized by Renault Samsung, the local unit of French automaker Renault SA, to launch an electric vehicle.

Nissan on Wednesday moved up its earnings release for the fiscal second quarter to Friday from next Tuesday. The company said that the change was due to "executive schedule changes." It didn't elaborate.

Nissan Chief Operating Officer Toshiyuki Shiga was scheduled to attend a news conference for the earnings at its headquarters in Yokohama.

But a Nissan spokeswoman declined to comment on who will be speaking at the press conference and whether there will be any announcement in addition to the result.

Notable after hours earnings movers: FSLR +10.1%, CTRL +7.3%, TRMB+ 5.2%, ELLI -21.1%, HTCH -18%, BODY -18% Companies trading higher after hours following earnings/guidance:

FSLR +10.1%, CTRL +7.3%, TRMB +5.2%, GDOT +5.1%, AHS +4%, MHK +3.7%, SWN +2%, CALD +1.5%, BBG +0.8%, ANH +0.4%, AMRS +0.3%

Companies trading lower after hours following earnings/guidance:

ELLI -21.1%, HTCH -18%, BODY -18%, OPLK -8%, FLR -3.3%, AIG -2.5%, KOG -2.1%, NEM -0.9%, KRG -0.5%, GSIT -0.1%, ONNN -0.1%

Star Wars 7 Under Pressure for 2015 Release: Hollywood Reporter

Disney’s Star Wars Episode VII facing pressure to release in 2015, despite request from writer Michael Arndt, studio to push release date to 2016, Hollywood Reporter writes citing people close to project. * CEO Robert Iger adamant on 2015 release date

Credit Suisse Dismisses London Trader Over 'Unusual Trading' Losses

Bank Is Investigating How Position Went Undetected

LONDON— Credit Suisse Group AG CSGN.VX +0.21% said a London trader within its investment bank racked up nearly $6 million in losses that haven't previously been made public. The incident has sparked an investigation and attracted continuing scrutiny from British regulators, according to people familiar with the matter.

The losses were sustained late last year, but Credit Suisse this week dismissed an exchange-traded-funds trader, Rohit Jha, in connection with the money-losing positions, these people said. The Swiss bank in January suspended his boss, Matthew Tagliani, who oversaw the bank's London ETF-trading desk, which does business across Europe, the Middle East and Africa, these people said.

While the losses aren't considered financially material, Credit Suisse is continuing to investigate how the positions went undetected by its safeguarding systems—and weren't reported to supervisors—for 16 business days last December, according to the people familiar with the matter. At issue is whether other trades that could be more damaging are being properly monitored, the people said.

The U.K.'s Financial Conduct Authority is also reviewing the trades and supervision of the unit, the people said.

Efforts to reach Messrs. Jha and Tagliani were unsuccessful. Mr. Tagliani remains suspended, according to a person familiar with the situation.

"As soon as Credit Suisse discovered unusual trading activities by one trader on its London equity division [exchange-traded funds] desk, the bank promptly notified the relevant authorities and has been cooperating with its regulators," Credit Suisse spokeswoman Sofia Rehman said. "We are confident the trader acted alone and that the matter has been contained."

Mr. Jha was a vice president in Credit Suisse's ETF-trading unit in London. He had worked as a full-time employee at Credit Suisse since July 2009, after starting the previous year as an intern, according to his LinkedIn profile and a person familiar with the matter.

Mr. Tagliani's January suspension came five months after he started at the bank amid its efforts to expand regionally in the growing ETF business, according to the people familiar with the matter. U.K. regulatory records indicate he was deregistered to act in a customer-facing role Oct. 11.

The ETF-trading position in question at one point was in the red almost $20 million, although it ultimately caused a net trading loss of less than $6 million, according to people with knowledge of the details. Individuals besides Mr. Jha discovered the trade and reported it internally, and the bank then notified regulators, one of the people said.

Ms. Rehman confirmed the loss amount and said no clients were affected.

Nevertheless, the circumstances set off a series of questions and a monthslong inquiry that has involved senior executives in equities trading, securities financing and the global investment bank in Europe and the U.S., according to people with knowledge of the matter.

Credit Suisse continues to investigate how a position with the potential for losses that size could go undiscovered for more than a couple of days, the people say. The bank remains in discussions with U.K. financial regulators over the matter, and it isn't clear what, if any, actions might come of continuing inquiries, according to people familiar with the discussions.

One person familiar with the trade said it wasn't properly hedged, or balanced with an offsetting position to reduce the risk of losses. While it isn't clear how the positions went undetected, Credit Suisse's internal investigation has focused in part on whether the bank adequately prevents traders from concealing positions from reporting systems designed to detect potential losses, people close to the matter said.

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AT&T Said to Explore Vodafone Takeover as Soon as Next Year (2) 2013-10-31 20:36:49.984 GMT

(Updates share trading in fourth paragraph.)

By Matthew Campbell and Jeffrey McCracken Oct. 31 (Bloomberg) -- AT&T Inc. executives are laying the groundwork internally for a potential takeover of Vodafone Group Plc next year, mapping out a strategy for a complex deal with Europe’s largest mobile carrier, people familiar with the situation said. While the companies haven’t entered formal negotiations, the largest U.S. phone company is intensifying work on which Vodafone assets it would retain after a deal and who could buy others, the people said, declining to be identified discussing private deliberations. AT&T, which remains interested in U.K. carrier EE as an alternative target, is also formulating a strategy for Vodafone’s operations in Europe, where mobile broadband adoption has lagged the U.S., the people said. A merger, which would create the world’s largest telecommunications operator by sales, wouldn’t be AT&T’s first attempt at combining the companies. AT&T approached Verizon Communications Inc. this year about a transaction in which AT&T would buy Vodafone’s European operations, with Verizon taking over their wireless joint-venture and America Movil SAB taking much of the rest, two of the people said. Verizon rejected that approach as too complex and likely to slow its own $130 billion purchase of Vodafone’s 45 percent stake in Verizon Wireless, they said. Vodafone’s New York-traded shares rose as much as 4.4 percent to $37.90 and ended trading at $36.86. AT&T fell less than 1 percent to $36.20.

Globe-Spanning Company

Combined, Vodafone and AT&T would be a globe-spanning telecommunications player with a market capitalization exceeding $250 billion and large-scale operations in the U.S. and across Europe. With more than 500 million wireless subscribers worldwide, the company would be able to challenge Google Inc. and Apple Inc. when negotiating handset subsidies and wringing profit out of nascent technologies such as mobile advertising. Any transaction would have to wait for the conclusion of Vodafone’s sale of its Verizon Wireless stake, which the companies expect to close in early 2014. AT&T may ultimately decide not to proceed with a bid, the people said. Simon Gordon, a spokesman for Newbury, England-based Vodafone, declined to comment on the company’s interest in a sale to AT&T or anyone else. Brad Burns, a spokesman for Dallas- based AT&T, declined to comment on the company’s European plans.

Colao’s Plans

Bob Varettoni, a spokesman for New York-based Verizon, also declined to comment. A representative for America Movil didn’t immediately respond to a request for comment. Vodafone Chief Executive Officer Vittorio Colao is in principle open to a deal, depending on its terms, one of the people said. A former McKinsey & Co. consultant, Colao is nonetheless formulating a stand-alone strategy for Vodafone that could include major new deals in landline telecommunications, the person said. The company had almost 13 billion pounds ($21 billion) in cash and short-term investments at the end of March, a number that doesn’t include its windfall from the Verizon Wireless stake sale.

AT&T Priorities

Finding a new home for some of Vodafone’s diverse assets would be a priority for AT&T, which is less interested in Africa and India than in Europe’s developed markets, the people said. Vodafone said this week that it is seeking to take full control of its Indian unit, and has asked for permission from India’s government to do so. One potential strategy AT&T has examined would involve spinning off most of Vodafone’s emerging-market assets into a new entity that could be acquired by a single buyer, such as Carlos Slim’s America Movil or China Mobile Ltd., one of the people said. Such a plan was the basis for AT&T’s approach to Verizon earlier this year, two of the people said. AT&T owns a 9 percent stake in America Movil and has two seats on its board. Orange SA, the French company that operates in African countries including Kenya and Senegal, has expressed interest in buying some of Vodafone’s African operations, according to a person familiar with the matter. Through Vodacom Group Ltd., a Johannesburg-based subsidiary, Vodafone operates in South Africa and Mozambique, among other African countries. A representative for Orange declined to comment.

Stiff Competition

As an alternative to Vodafone, EE -- Orange’s joint venture with Deutsche Telekom AG in the U.K -- could be used as a platform for further acquisitions in Europe, the people said. However, that plan would be hampered by the lack of an obvious target in Germany, the region’s biggest economy, where Vodafone, Deutsche Telekom, Telefonica SA and Royal KPN NV are the four network operators, one of the people said. AT&T is looking to international expansion as it prepares for stiffer competition in its home country, the world’s largest market for mobile broadband. Now that it is taking full ownership of its wireless business, Verizon is pledging to step up investment in so-called fourth-generation networks that power devices like the iPhone. Meanwhile, Japanese billionaire Masayoshi Son’s SoftBank Corp. has entered the U.S. market by buying Sprint Corp., which he has said will become a stronger competitor to its larger rivals.

Europe Positioning

The acceleration of work at AT&T on European expansion comes after the company concluded there are cost and strategic advantages to global scale as technological change becomes more rapid, the people familiar with its strategy said. Attempts to create global telecommunications companies have a checkered history that includes the 2002 bankruptcy of Global Crossing and Concert, a failed venture between the original AT&T Corp. and BT Group Plc. A merger or takeover of Vodafone could attract political opposition in the U.K., where it has one of the most visible consumer brands. Operating from a quiet village west of London, it’s one of Britain’s most successful non-financial companies, with a market capitalization greater than BP Plc or GlaxoSmithKline Plc. However, U.K. takeover laws don’t provide a clear mechanism for the government to block a foreign deal, and previous opposition to Kraft Foods Inc.’s 2010 takeover of chocolate- maker Cadbury Ltd. didn’t go beyond strongly-worded speeches and newspaper editorials. Vodafone has its own reasons to seek a new strategy through a tie-up. Growth in Europe has stagnated as the penetration of smartphones plateaus and regulators impose caps on fees from wireless roaming. Recently, CEO Colao has pushed into fixed-line communications with a more than $10 billion deal for Kabel Deutschland Holding AG, the largest German cable operator, that will allow Vodafone to bundle mobile and home broadband packages in its largest market.

For Related News and Information: AT&T Biggest Telecom Loser on Expansion Bets: Corporate Finance NSN MTZZTO6JTSEB <GO> Verizon-Vodafone Talked Merger Before Agreeing to Stake Sale NSN MSJJOU6JIJUS <GO> Vodafone deal news: VOD LN <Equity> TCNI MNA <GO> AT&T deal news: T US <Equity> TCNI MNA <GO> Top Stories:TOP<GO> Mergers and acquisitions news: NI MNA <GO>

--With assistance from Amy Thomson in London, Scott Moritz in New York, Marie Mawad in Paris and Patricia Laya in Mexico City. Editors: Mohammed Hadi, Crayton Harrison

To contact the reporters on this story: Matthew Campbell in London at +44-20-3525-8684 or mcampbell39@bloomberg.net; Jeffrey McCracken in New York at +1-212-617-8517 or jmccracken3@bloomberg.net

To contact the editor responsible for this story: Katherine Snyder at +1-212-617-5212 or ksnyder@bloomberg.net