Vodafone mulls acquiring Liberty Global

British telecom major Vodafone Group Plc is exploring the acquisition of John Malone-backed Liberty Global Plc, a deal that would create Europe's largest phone, internet and TV company, Bloomberg today reported, citing people with knowledge of the matter.

Vodafone is holding internal deliberations and analysing the financial and regulatory hurdles as well as investor support for an all-share deal, the report said, adding that valuation and regulatory issues would the key obstacles to the deal.

For Vodafone, the need for the acquisition has now become compelling as local rival BT Group is currently in talks to acquire either EE or Telefonica's 02. (See: After O2, BT in talks to buy mobile phone operator EE)

Liberty Global, backed by US billionaire John Malone, operates very high-speed broadband cable networks in nearly a dozen European countries.

Colorado-based Liberty Global was formed through the 2005 merger of Liberty Media and UnitedGlobalCom.

It operates in 10 countries in Europe, and is the largest cable operator in Poland, Switzerland, Belgium, Austria, Slovakia, Hungary and Czech Republic.

Liberty Global, which has splurged around $40 billion in the past seven years in acquiring European assets, has a market cap of $39.4 billion and debt of $41.1 billion.

Early last year it paid $15.75 billion to  acquire Virgin Media Inc, the UK's second largest pay-TV operator that also provides fixed and mobile telephone, and broadband internet services.. (Liberty Global strikes Virgin Media deal for $15.75 bn)

As part of its acquisition, Liberty Global relocated to the UK by becoming a subsidiary of a new British holding company.

Vodafone is one of the world's leading mobile communications providers, operating in more than 30 countries and in partnership with networks in over 50 more.

The Newbury, Berkshire-based company, whose current share price is 233.95p, has cleared most of its debt after it sold its stake this year in US-based Verizon Wireless for $130 billion. It had £5.9 billion in cash at the end of September, according to Bloomberg.

Vodafone, which already has a fibre network through the acquisitions of Cable & Wireless Worldwide, Kabel Deutschland and Spain's Corporativo, has nearly 419 million customers across 30 countries and around 19 million in the UK.

The merger between Vodafone and Liberty Global would create a communications company with annual sales of more than $80 billion.

But the potential deal is likely to face regulatory issues in the UK, Germany, and the Netherlands, since their operations overlap each other.