Vodafone in €10bn German cable takeover talks

Mobile phone giant Vodafone signalled a move into fixed-line TV and phone services as it confirmed it had approached Germany’s biggest cable company about a possible takeover reportedly worth €10bn.

It said a preliminary approach had been made regarding a potential offer for Kabel Deutschland, which provides TV, internet and phone services to more than eight million households.

The purchase would mark a step-change in Vodafone’s strategy, adding to its expansion into broadband in Europe and complementing its existing services in the continent’s largest market with a major presence in fixed-line TV and telephone.

Operators are increasingly attracted to the “quad play” business model, in which customers are able to subscribe to a package including TV, internet, landline and mobile services.

Reports suggested that talks between Vodafone and Kabel have not formally begun because the German company believed the price suggested by Vodafone was too low. It was said to be considering an offer.

Vodafone said in a statement: “There is no certainty that any offer will ultimately be made nor as to the terms on which any such offer might be made.”

The British company has been expanding its presence in Germany recently, announcing a tie-up with Deutsche Telekom to offer pay-TV over high-speed broadband to its customers.

Emmett Kelly, an analyst at Bank of America Merrill Lynch, said the move for Kabel made sense for Vodafone, which it placed on a “buy” rating.

With Germany one of its better-performing markets, it would be likely to have a positive impact on earnings within two years, while dividends from the US would bolster its capacity to pay for the deal, Kelly said.

He added that it would “place Vodafone on the attack in the soon-to-be-emerging German quad-play market” helping it lead the pack rather than lag behind as it had done in Spain.