* FTSE 100 flat at 6,733.94 points
* Vodafone shores up FTSE on AT&T takeover speculation
* RBS falls after unexpected loss
* Meggitt tumbles after cutting full-year guidance
By Francesco Canepa
LONDON, Nov 1 Heavyweight Vodafone kept
Britain's top share index afloat on Friday as speculation about
a bid from U.S. peers AT&T fuelled a rally in Europe's
largest mobile carrier.
Shares in Vodafone rose 3.2 percent to 231 pence, adding 13
points to the FTSE 100 after a media report that AT&T
was exploring strategies for a potential takeover of the British
telecoms firm as part of a push into Europe.
BofA Merrill Lynch, which sees the UK mobile company as a
good cultural fit with AT&T, said it expects Vodafone's shares
to rise 27 pence and that a potential bid from AT&T could offer
Merger & acquisition activity in the European telecoms
sector has been picking up pace in recent months as operators
sell some of their assets to cut debt and overseas investors
take advantage of some of the lowest valuations in decades in
the sector, which has been hit by Europe's economic crisis.
"M&A is a big sector theme in European telecoms currently,"
said Guy Peddy at Macquarie Research, adding any AT&T bid for
Vodafone was likely to be in the 250 pence - 255 pence range.
"European operators are in some cases looking to divest
assets to de-risk but also the implied valuation of European
assets is noticeably lower than other geographies so you'll see
more interest from overseas investors."
The FTSE was up 2.51 points to 6,733.94 points at 1553 GMT.
The index hit a five month high at 6,819 earlier this week and
is up 12 percent from June.
Societe Generale's derivative strategists said a rally in
the FTSE was now likely to pause and recommended that investors
sell options to buy the index at 7,000 points by December.
Curbing gains on the FTSE was state-backed lender Royal Bank
of Scotland, down 7.6 percent after it posted
worse-than-expected results that overshadowed its moves to deal
with a $61 billion portfolio of bad debts.
Joining the country's fifth biggest bank by capitalisation
among top fallers was aircraft parts supplier Meggitt,
down 11.3 percent and on course for its worst daily loss in 12
years after the company cut its full-year revenue guidance.
The two firms' results added to a largely negative tone from
corporate reports this week and drove heavy selling of both
stocks, with volume more than three times their respective
full-day averages for the past three months, compared with less
than 74 percent for the FTSE 100.
As the earnings season passes the half-way mark, 53 percent
of companies so far in the STOXX Europe 600 index have
missed consensus expectations, compared with less than half in
recent quarters, running somewhat counter to the growing
optimism about Britain's macroeconomic numbers.
Analysts have cut their estimates for next year's earnings
from British companies by 1.1 percent in the past 30 days and
now the mean estimate from analysts with the best track record
is for a 10.8 percent growth rate.
"We're still waiting for this point when we can proclaim
'yes earnings growth is picking up significantly'," said Lars
Kreckel, global equity strategist at Legal & General Investment
"We've done a lot of pricing out of risk and... my base case
is that equities have roughly an upside equivalent to the
earnings growth that we can expect (next year)."
(Reporting By Francesco Canepa, editing by Gareth Jones)