Vodafone in early talks with Liberty
Possible exchange of assets
VODAFONE, the world’s second biggest mobile company, said it was in early talks about exchanging selected assets with Europe’s largest cable operator Liberty Global, which could enable each to better compete with rivals.
Analysts and sector bankers said the two most important countries for both firms where they overlapped were Britain and Germany. They also both operated in Ireland, the Netherlands, the Czech Republic, Hungary and Romania.
Vodafone, traditionally a mobile-only company, has been on the back foot in recent years as companies with access to mobile and fixed-line infrastructure such as Orange, Telefonica and Deutsche Telekom offer packages of services to customers in one bundle.
After weeks of speculation, Vodafone released a statement on Friday saying it was not in merger talks with Liberty, but was holding talks about a possible exchange of assets, without saying which businesses were being discussed.
“While talks might yet lead to a full combination with Liberty, an asset swopwould allow both parties to boost their respective positions in converging markets, and could still lead to a full combination over time,” analysts at Deutsche Bank said.
In Germany, Deutsche Telekom has started selling mobile, internet, TV and fixedline telephony in one package and in Britain, BT will be able to do the same once it has completed the acquisition of the country’s largest mobile operator EE.
Liberty Global, which has operations in 12 European countries, has a market capitalisation of $46 billion (R577.4bn), while Vodafone’s is £66bn (R1.26 trillion).
An industry banker said he believed Vodafone’s primary interest was in acquiring Liberty’s UK arm Virgin Media, while the main attraction for Liberty was Vodafone’s German business.
Liberty already owns Unitymedia, Germany’s secondbiggest cable operator, and it has long coveted its bigger rival Kabel Deutschland, which Vodafone bought in 2013 for $10bn to merge with its mobile operations there.
“This deal is about swopping UK with Germany. Nothing else is relevant,” the banker said.
Home market
Alternatively, analysts said Vodafone could sell its British and Dutch operations in exchange for Liberty’s German business. However, that would leave Vodafone out of its home market.
The lack of an obvious solution may shed light on why the two firms have failed to agree on a wider deal despite much speculation.
The stock is trading up 7 percent since May 19 when John Malone, the US “King of Cable” and chairman of Liberty, said in an interview that the two companies would make a “great fit”.
Other ways of teaming up include commercial deals, where both firms agree to sell the other’s services, but these tend to be difficult to agree in terms of pricing and discounts. It would also not provide the billions of pounds of synergies that could come from a merger or acquisition. – Reuters