Thursday, 24 May 2018

Vodafone to acquire €18 billion of European assets from Liberty Global

By Chris Kelly, Total Telecom
Wednesday 09 May 18

The acquisition will help Vodafone compete with Deutsche Telekom and others for a bigger slice of Europe's telecoms revenues

Vodafone is set to complete the €18 billion purchase of a string of strategic German and Eastern European assets from Liberty Global.  The deal will see Vodafone take possession of Liberty Global's German cabling firm Unitymedia and three smaller business units in THe Czech Republic, Hungary and Romania.  “This transaction will create the first truly converged pan-European champion of competition…

Vodafone is set to complete the €18 billion purchase of a string of strategic German and Eastern European assets from Liberty Global. 

The deal will see Vodafone take possession of Liberty Global's German cabling firm Unitymedia and three smaller business units in THe Czech Republic, Hungary and Romania. 

“This transaction will create the first truly converged pan-European champion of competition. It represents a step change in Europe’s transition to a Gigabit Society and a transformative combination for Vodafone that will generate significant value for shareholders. We are committed to accelerating and deepening investment in next generation mobile and fixed networks, building on Vodafone’s track record of ensuring that customers benefit from the choice of a strong and sustainable challenger to dominant incumbent operators. Vodafone will become Europe’s leading next generation network owner, serving the largest number of mobile customers and households across the EU,” said Vodafone Group chief executive Vittorio Colao. 

Analysts believe that the move will help Vodafone rollout 4G and 5G services in Eastern Europe, while simultaneously providing it with a platform to challenge Europe's dominant player, Deutsche Telekom. 

"For Vodafone, the acquisition of selected Liberty Global assets is a strategically sound approach to strengthen its position. Convergence is one of Vodafone's strategic pillars, with nearly 30 percent of European service revenue now coming from its fixed-line business. It is consistent with previous acquisitions (Kabel Deutschland in Germany and Ono in Spain).

 "Vodafone now becomes a powerful rival to Deutsche Telekom in bundled services. However, we strongly believe that regulators will block or restrict the deal. Vodafone and Liberty Global have a relatively solid presence in the fixed-line and TV markets, so any move would cut the number of companies in both segments," said Paolo Pescatore, VP, Multiplay and Media at CCS Insight.

As recently as last month, Liberty Global had explored the possibility of expanding its Eastern European operations, making an €876 million bid to acquire Polish media firm, Multimedia Polska. However, Liberty shelved the deal when it was unable to agree terms with the Polish media giant. 

The sale of its Eastern European assets to Vodafone in all likelihood signals the end of Liberty Globals interest in eastward expansion and follows a broader trend of the company divesting its non-core assets. 

" For Liberty Global this is a further sign of disposing of non-core assets, specifically in markets where it lacks the resources to compete or needs to invest heavily to match rivals. Austria is a prime example of this. We expect Liberty to use these funds to strengthen its position in other markets such as the UK," added Pescatore. 

The deal has been gathering momentum over the past 4-6 weeks but will be subject to standard regulatory approval from the European Commission. Upon completion, the deal will represent the biggest acquisition in Europe's telecoms market for at least five years. 

 

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