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Vodafone Eye Virgin Media’s Liberty Global as EU Clears BSkyB Acquisitions

Friday, September 12th, 2014 (8:32 am) - Score 3,276

At times Vodafone’s on-going attempts to grab a slice of the UK and or EU fixed broadband, TV and phone market can seem akin to throwing a bunch of big names around and seeing what sticks. So it’s little surprise to find that they seem to have moved from sniffing around BSkyB (Sky Broadband) to showing interest in Virgin Media’s parent, Liberty Global. Meanwhile BT continues to threaten.

In the latest twist Vodafone’s CEO, Vittorio Colao, has very publicly informed Bloomberg.com that the mobile telecoms giant would be willing to expand upon its recent cable operator acquisitions in Spain and Germany by gobbling Liberty Global’s EU division, albeit naturally only “for the right price“.

The position now seems to be pushing Vodafone’s focus towards Liberty Global, which only last June officially completed its £15bn (enterprise value) acquisition of broadband, phone and TV giant Virgin Media in the United Kingdom (here). Suffice to say that Liberty Global’s shares have this morning rocketed from around 41.7p to 43.8p, while Vodafone’s took a slight hit but remain fairly steady at around 203p.

The news follows a separate May 2014 confirmation by BSkyB UK that Vodafone had also expressed an interest in merging with them, possibly alongside Sky Italia and Sky Deutschland, although at the time Sky’s parent (21st Century Fox) said that “no agreement between the parties has ever been reached” (here and here). It’s understood that Sky and Vodafone had discussed a merger or some form of collaboration in the broadband, TV and mobile markets, partly through a desire to combat BT’s growing presence in the related sectors (BT has already moved into TV and they’re now adding mobile into the mix).

But Vodafone’s efforts appear to suggest a strategy of increasing frustration, after all any potential acquisition target with an ounce of common sense will already be aware that Vodafone now has significant cash reserves after they sold off their 45% stake in Verizon Wireless. Unfortunately this can make negotiations to buy competitors a lot more difficult since everybody becomes inclined to push for an inflated price.

Certainly Liberty Global, having only just gobbled Virgin Media, would be likely to follow suit by putting a much higher value on themselves than Vodafone may be willing to pay, hence the “right price” remark. Put another way, Vodafone thinks the price is currently too high but they’re keeping the option open, just as they have done with Sky.

By coincidence the European Commission (EC) has just officially approved BSkyB UK’s (21st Century Fox) move to create a pan-European pay TV and communications provider (Sky Europe) by clearing the groups acquisition of Sky Italia and a 57.4% stake in Sky Deutschland (here).

The Commission concluded that the transaction would “not raise competition concerns, since the activities of the three companies are geographically complementary“. In other words, BSkyB’s activities are mainly focused in the UK and Ireland, Sky Deutschland’s activities are mainly focused in Germany and Austria and Sky Italia’s activities are mainly focused in Italy.

It’s long been predicted that Sky would need to complete this move before either buying up one of its other UK rivals (a mobile operator perhaps?) or entering into some sort of merger with Vodafone. Sky wants to be able to offer a mobile service in the UK, while Vodafone appears to be attracted by their broadband and TV solutions. But as above, no agreement has ever been reached.

The situation, at least for Vodafone, could soon become critical because BT is on the verge of launching their mobile proposition to the consumer market. Vodafone’s boss has previously warned that any move by BT to offer heavily discounted mobile services would trigger them to respond in the fixed broadband market, although right now their guns are somewhat short on powder.

Vodafone’s previous attempts to offer an affordable home broadband service (aka – Vodafone At Home) died a slow death in 2011 (here). Mobile operators have a generally poor history of making UK consumer broadband work, although Vodafone does have a strong capacity/fibre supply network from their Cable & Wireless gobble. 2015 is fast shaping up to be a very interesting year.

Leave a Comment
5 Responses
  1. Avatar TomL says:

    No doubt it would be another Vodafone tax avoidance purchase costing the tax payer billions.

    http://www.theguardian.com/business/2013/sep/02/vodafone-verizon-deal-tax-margaret-hodge

  2. Avatar Matthew Williams says:

    Wonder how the EU Commission would feel on them buying up Liberty Global EU Branch imagine there would be at least some crossover and possible competition issues. Would certainly position Vodafone though to be a strong player in Europe. Which they need to be now.

    1. Part of me wonders if the EU would love to create/facilitate a dominant pan-European telco as that would give it the “evidence” it needs to trash the country NRAs and set up its own (dominant!!) pan-European NRA. For the good of all us European citizens of course, since Brussels does know what’s best for us even if we don’t. 🙂

  3. Avatar JC says:

    Vodafone buying Sky would be a good deal. Sky has the fastest core network in the UK (world record holders for bandwidth down a single fibre pair, set in Jun 14 between london and Birmingham) but lacks the last mile fibre footprint which Vodafone largely accurried with its purchase of Cable and Wireless. BT have been holding everyone to ransom with their line rental charges which Sky, Talktalk etc have to pass on in their ADSL broadband. Sky has done fibre to the Home trail in London trial and could offer 1 Gigeabyte broadband speed and a merger of Vodafone and Sky would create a true rival for BTs control of last mile and a good deal for customers across the board. BT currently only offer fibre to the street with a copper tail to the house which is physically limited to around 80Meg tops depending on distance.
    Sky have the content that Vodafone needs. Just needs Sky Share price to fall and think Vodafone would go for it, but this is unlikely to happen any time soon, as Sky is growing its customer base.

    1. Avatar mary says:

      Hi

      The government forcing the local loop duck network into the ownership of a non ISP company would surely be the best way opening up competition in broadband market

      mary

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