Vodafone’s share price plummeted 3% today after it was reported that its management was considering a share-based transaction to acquire John Malone’s pan-European cableco Liberty Global.
The British telco’s management is having internal…
Vodafone’s share price plummeted 3% today after it was reported that its management was considering a share-based transaction to acquire John Malone’s pan-European cableco Liberty Global.
The British telco’s management is having internal discussions to look at the financial and regulatory implications of a takeover, and whether its investors would support the move, people with knowledge of the matter told Bloomberg.
All three issues would be key obstacles to a deal, particularly the combined group’s debt levels and Vodafone shareholders’ feelings about a deal, the report said.
Liberty Global’s share price initiallty soared 7.5% on the back of the news, but then fell away and ended up down almost 3% for the day. For Vodafone, an acquisition of Liberty Global would be an extension of its strategy over the past few years to buy up fixed-line and cable assets in markets where it already operates mobile services.
Vodafone declined to comment on the report.
Liberty Global has fixed-line/cable assets in seven European markets where Vodafone already has mobile operations. These include the UK and Germany, where Vodafone has already made convergence plays, snapping up Cable & Wireless Worldwide in 2012 and Kabel Deutschland in 2013.
The sheer breadth of each company’s operations – Vodafone operates in 14 European countries while Liberty Global has interests in 13 – means the regulatory review process could be cumbersome.
However, a deal would represent the kind of cross-border consolidation which the European Commission and telecoms lobby groups have sought to foster to create a single market for EU telcos.
Liberty Global’s market capitalisation is around US$41bn, while its net debt pile stood at US$41.1bn as of 30 September following an acquisition spree over the past few years.
Vodafone’s market capitalisation is in the region of £60.3bn (US$94.7bn) and it disclosed net debt of £21.8bn (US$34.2bn) at the end of Q3.
Vodafone’s reported interest in a merger follows last week’s confirmation that UK fixed-line incumbent BT was in talks to buy a mobile operator. BT said it was holding discussions with Telefonica for O2, and Orange and Deutsche Telekom for EE, and that it was approached by the operators’ owners.
If BT can reach an agreement it would enable it to become the first UK telco to offer true quad-play bundles and usher in the convergence which has already been seen in other European markets.
BT is already due to launch a consumer mobile service by April. It has an agreement in place with EE to launch an MVNO on the joint venture’s network. British mobile operators are said to be worried about the implications of BT’s MVNO – in other European markets fixed-line operator’s MVNO offerings have eaten into network operator’s subscriber numbers.
