Wednesday, May 9, 2018

Vodafone signs new deal on TV and broadband in Europe with €19bn Liberty Global deal

Vodafone Group has agreed to buy German and east European units from Liberty Global in a €19bn deal that shakes up the region’s TV and broadband market and signals a retreat by US billionaire John Malone.

Vodafone will buy Liberty Global’s Unitymedia, the second-largest cable network in Germany, as well as
the Czech Republic, Hungary and Romania divisions of the central and eastern European brand UPC, Malone’s cable carrier said on Wednesday.
The transaction expands Vodafone’s cable footprint in a challenge to Germany’s incumbent operator, Deutsche Telekom, giving the phone company more reach and scale to bundle internet, phone and TV services.

The tie-up follows years of on-and-off talks about asset swaps and mergers, which had stalled over disagreements about valuations and debt.
"The combination of Liberty Global and Vodafone’s businesses will transform the competitive landscape and bring a new level of convergence to customers," Liberty Global CEO Mike Fries said in the statement.

Liberty Global will receive €10.6bn of cash proceeds from the deal.
The company — which, like Vodafone, seeks to be a top carrier in each of the markets where it operates — had been struggling to find a way to gain clout with mobile services in Germany.
The agreement focuses Liberty Global more on the UK and Ireland, its largest market, and follows the sale of its Austrian cable division to Deutsche Telekom late last year.


The proposed deal marks a major consolidation for European carriers, which remain significantly more fragmented than their US peers.
It will face scrutiny from regulators, either in Germany or at the European Union, the latter having blocked the merger of CK Hutchison Holdings’s Three and Telefonica’s O2 in the UK in 2016.
Tim Hoettges, the former German monopoly’s CEO, called in February for such a deal to be blocked, saying the convergence of TV and cable services at such a scale could be harmful for democracy in the country.

Vodafone CEO Vittorio Colao suggested his counterpart’s remarks stemmed from concern about increased competition.
Fries argued in an interview that the deal was "exactly what the German market" needed — a "stronger, more consolidated competitor to Deutsche Telekom in a market that has really lagged in innovation and investment".
"So I think this will get approved and I think it’s definitely in the best interests of consumers and we’ll make that argument," he said.

Wednesday’s tie-up may not mark the end of Liberty and Vodafone’s discussions.
Executives on both sides have publicly mused about the potential for a merger of the companies, to create a European challenger with the mobile and fixed assets to better take on incumbents.
Vodafone chief financial officer Nick Read recently hinted the operator was interested in buying out Liberty’s stake in the companies’ 50:50 Dutch joint venture, and Colao has said UK operations could be included in future talks.

Liberty Global and Vodafone, the world’s second-largest mobile carrier, agreed in 2016 to combine their businesses in the Netherlands to create a provider of internet, TV and mobile services that can offer customers bundles of services.


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