Vodafone, Liberty Global in talks to swap `select assets’: report

Vodafone has confirmed that negotiations were under way with Liberty Global Plc over a range or potential transactions, including outright merger, that could eventually see them swap some "selected assets", but added the two companies were not involved in merger talks, Independent.ie said in a report which had additional reporting by Reuters.

Vodafone counts over 2 million customers in Ireland, while UPC has about 511,000, which includes roughly 386,000 TV customers.

Under Irish-American billionaire John Malone, Liberty Global had spent a fortune acquiring prime properties and hotels in Ireland over the past few years.

Although Liberty Global and Vodafone operated across Europe, the primary focus for any swap would likely be the UK and Germany, according to commentators.

According to industry insiders, the targets would probably be operations in those two countries.

At least one industry banker believe that Vodafone's primary interest is in the acquisition of Liberty's UK arm Virgin Media, while the main attraction for Liberty could be Vodafone's German cable business. Liberty is owner of Unitymedia, Germany's second-biggest cable operator and had long coveted its bigger rival Kabel Deutschland, which Vodafone bought in 2013.

Meanwhile, Bloomberg citing independent sources reported that the talks were informal and at a very early stage and an agreement might not be reached due to the complexity of the proposed transactions and regulatory concerns. According to the sources, management issues, including who would run the combined company and the role of billionaire Liberty Global chairman John Malone, also posed hurdled.

A merger of the two carriers would see one of the largest deals ever, on the basis of enterprise value, with Liberty Global currently valued about $89 billion and Vodafone topping $140 billion in valuation. Liberty had retreated slightly over the talks in recent weeks, according to one of the people.

Vodafone shares were up 2.1 per cent at 253.35 pence at 8:02 am in London. Liberty Global was up as much as 6.2 per cent in late US trading on Thursday.

With pressure continuing to mount on companies to maintain profit growth, phone companies were turning to acquisitions to expand while cheap financing regime continued.

Liberty Global, the largest cable company in the world, could diversify its products by owning wireless assets, offering what is known as a quad-play, to customers, including TV, landline phone, broadband internet and wireless service.

European telecommunication companies have been rapidly consolidating to gain scale and offer more services amid competition that's driving down prices and profit margins. BT Group Plc said in February it agreed to acquire EE Ltd, the UK mobile business co-owned by Deutsche Telekom AG and Orange SA, for $19 billion. That deal also created a company that could offer a quad-play.