Vodafone to acquire Liberty Global's cable, broadband assets in Europe

The deal,which is  Vodafone's largest ever since it  withdrew from the US in 2014, excludes Liberty Global’s joint venture with Vodafone in the Netherlands, VodafoneZiggo, and Virgin Media in the UK. 

The acquisition will transform Vodafone from a mobile phone operator into a cable and broadband TV giant across Europe, and is aimed at accelerating its converged communications strategy through in-market consolidation in Germany, Vodafone’s largest market where it is a challenger to Deutsche Telekom, and in Central and Eastern European markets, the Czech Republic, Hungary and Romania.

“This transaction will create the first truly converged pan-European champion of competition,” said Vittorio Colao, chief executive of Vodafone Group. “It represents a step change in Europe’s transition to a gigabit society.. Vodafone will become Europe’s leading next generation network owner, serving the largest number of mobile customers and households across the European Union.”

The acquisition will enable Vodafone to emerge the leading next generation network  owner in Europe, with Liberty's 54 million cable / fibre homes ‘on-net’ under its umbrella, and a total NGN reach of 110 million homes and businesses, including wholesale arrangements.

Mike Fries, chief executive, Liberty Global, said, “Germany, for example, is dominated by one provider that controls over half the broadband market . As a result, innovation and investment lag other countries in Europe, impacting customer service, next-generation product deployment and broadband speeds. 

The deal will create a converged national challenger to Deutsche Telekom, in Germany with the scale to accelerate achievement of the German government’s digital ambitions, bringing Gigabit connections to around 25 million German homes by 2022. 

Deutsche Telekom has opposed the deal on the grounds it would distort competition in Germany. However Fries said, "Even together, Liberty Global and Vodafone, whose cable networks don’t compete or overlap, will be half the size of the incumbent operator. It’s time to alter market dynamics by unleashing greater investment and competition.” "

Vodafone expects to complete the acquisition in 2019, as it is likely to face a lengthy European regulatory review. 

As Liberty Media's media arm Unitymedia and Vodafone's  Kabel Deutschland cable network do not have overlapping regional operations, their combination will create a strong rival to Deutsche Telekom's digital infrastructure in the German market.

The combined businesses will strengthen Vodafone’s existing mobile operations in the Czech Republic, Hungary and Romania, reaching over 6.4 million homes and have 15.8 million mobile, 1.8 million broadband and 2.1 million TV customers.

The deal brings cost and capex synergies of approximately €535 million per year before integration costs by the fifth year after the completion of the deal  with an estimated net present value of over €6 billion after integration costs. 

The estimated revenue synergies with a net present value would exceed €1.5 billion from cross-selling to the combined customer base.