Vodafone and Liberty tie-up abandoned

Talks between Vodafone and Liberty Global about exchanging assets to better compete in Europe’s converging mobile, broadband, and TV markets collapsed yesterday because they could not agree on the value of their businesses.

Vodafone, the second biggest mobile operator in the world, said in June it was considering swapping some assets with Europe’s biggest cable company.

Such a move would have enabled the groups to sell packages of mobile, fixed-line, broadband, and television increasingly offered by rivals.

Liberty chairman John Malone, who saw the companies as a “great fit”, said earlier this month they were struggling to progress with the plan.

He told Bloomberg “conceptually there could be some real value created but realistically we haven’t been able to figure out a way to do that that’s mutually successful”.

The talks foundered on a failure to agree the relative value of assets on both sides, according to a source.

“We have not got there today, but we are not closing the door on potential discussions in the future,” the person said.

Shares in Vodafone, which had fallen 10% since the talks were revealed in June, were trading down 3.7% at one stage.

Liberty Global shares have fallen about 8% in the same period. Analysts at Jefferiessaid that they continued to see Vodafone as having weak standalone prospects.

The firms have never specified which assets were being discussed. But bankers and industry analysts said in June the German and British markets would top the agenda.

Vodafone and Liberty are first and second in the German cable television markets, owning Kabel Deutschland and Unity Media respectively.

The talks included Liberty Global’s German cable assets, and cable assets elsewhere in Europe, according to the person close to the matter.

Analysts had said a tie-up in Britain, where Liberty owns Virgin Media, would have made sense. Vodafone is facing an acceleration in convergence in its home market, after Britain’s biggest fixed-line and mobile operators BT and EE agreed to merge.

For now, the companies are forgoing what Malone once described as “enormous potential synergies”. Comparing Vodafone to “a big banana in the jar”, Malone said in May: “The question is: how do you get your hand out of the jar with the banana.”

Without a deal, Vodafone CEO Vittorio Colao may choose to add TV and internet services to his mobile networks in Europe.

In the UK, mergers among its rivals have left the company with few options outside of a deal with Virgin Media to gain market share.

The combination of O2 and Three, local units of Telefonica and Hutchison Holdings, will create the country’s biggest mobile operator while BT Group’s acquisition of EE will make it the largest “quadruple- play” service provider.

Reuters and Bloomberg


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