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Vodafone UK Still Considering Bid for Virgin Media’s Owner to Tackle BT

Saturday, November 29th, 2014 (7:32 am) - Score 1,807
vodafone uk broadband

The endless jostling for dominance of the United Kingdom’s fixed line broadband and mobile telecoms market has continued after reports appeared to suggest that BT’s move to grab either O2 or EE, which was mirrored by a similar approach from Three UK’s parent, has pushed Vodafone back towards a potential acquisition of Virgin Media (Liberty Global) or possibly one of the other big fixed line ISPs (e.g. TalkTalk or Sky Broadband).

It’s not the first time that Vodafone has hinted at an interest in Virgin Media after the mobile giants CEO, Vittorio Colao, confirmed during September 2014 that he would be willing to expand upon their recent cable operator acquisitions in Spain and Germany by gobbling Liberty Global’s EU division, albeit naturally only “for the right price” (here).

Meanwhile Liberty Global only recently completed a £15bn (enterprise value) acquisition of broadband, phone and TV giant Virgin Media in the United Kingdom (here) and are still in the process of working through that transition. However, according to Reuters, five sources described as being “close to the matter” claim that internal deliberations at Vodafone have picked up pace since BT’s moved on O2 or EE was announced (here).

One of those alleged sources is quoted as saying, “Liberty is the obvious one that makes sense … Vodafone need fibre and that is what Liberty has.” Admittedly Virgin Media’s hybrid-cable network is a lot more independent than the other takeover candidate, TalkTalk, which is effectively reliant upon BT’s infrastructure. But contrary to the report Virgin do not take fibre optic cables direct to most of their homes, instead they use a mix of fibre optic and slower coaxial with some copper cables (EuroDOCSIS standard).

On top of that Virgin Media recently stopped supplying non-cable based (i.e. ADSL2+) copper broadband lines, which they previously sold by using part of BT’s network in areas where their cable infrastructure couldn’t reach. Needless to say that Vodafone UK also gave up on copper broadband services in 2011 and so we have our concerns about the ability of either operator to make a universal service, operating outside of Virgin’s cable footprint, work.

At the same time all of this competition for fixed line and mobile operator acquisitions will mean that prime targets like Virgin Media, EE and O2 (plus to a lesser extent TalkTalk) can afford to play with their prices a bit and arguably get more than they’re worth, with the prime buyers being fearful of losing out as the market moves increasingly towards converged (bundled) service provision.

It’s difficult to guess what the market might look like in 12 months’ time because all of the possible permutations, combinations and their knock-on effects are starting to become quite mind boggling. Needless to say that the competition regulator and Ofcom might well have a very busy year ahead.

Overall 2015 appears to be the year that it all changes; the year where what was once familiar becomes new and different again, fundamentally speaking. But it remains to be seen whether any of this will really be to the benefit of consumers and as ever in such a race there will be both winners and losers.

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Mark Jackson
By Mark Jackson
Mark is a professional technology writer, IT consultant and computer engineer from Dorset (England), he also founded ISPreview in 1999 and enjoys analysing the latest telecoms and broadband developments. Find me on Twitter, , Facebook and Linkedin.
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8 Responses
  1. Avatar dave

    buying out the whole of liberty global’s european operations would be immensely expensive. I’d rather vodafone just lay FTTP in areas that don’t have cable or FTTP installed. They could build a good customer base up within a few years. They could buy out KCOM in york too which has FTTP and has almost complete monopoly there.

    • KCOM are in Hull and surroundings not York. 190-200,000 premises aren’t really going to do much for Vodafone as far as competing with others go.

      Deploying FTTP in areas with no cable or existing FTTP is a multi-billion pound, multi-year job. It’d take a few years to build the network and leave 50% of the UK untouched – the result being they still can’t compete in most of the country and even where they do build they then have the task of acquiring the content for that network.

      It would be possible to buy out Liberty Global with at least partly stock, building networks requires cash.

      The UK market is too price sensitive and too competitive for Vodafone or anyone else who doesn’t have a pretty persuasive package or big existing customer base to spend billions building FTTP.

      No-one is going to randomly decide to step in and deploy FTTP where there’s no commercial case to without some taxpayers’ cash.

  2. Avatar dave

    Vodafone could give Fujitsu some of their stock in exchange for building an FTTP network for them.

    • Avatar TheFacts

      Do you understand the cost of building a FTTP network and the return on it?

    • Presumably Fujitsu would pay their staff, contractors and suppliers with Vodafone stock too?

      Vodafone’s shareholders who see their shares diluted during this network build aren’t going to be overjoyed either.

      Vodafone then have the pleasure of starting from scratch trying to sell on this network they’ve heavily diluted their stock building, while BT et al sell FTTC alongside existing content and triple-play deals for £20 per month.

      Or buy a company with existing content deals, millions of subscribers, a ready-made network capable of gigabit downstream speeds in the near future, operational and retail presence and brand awareness throughout its pan-European footprint.

      If it came down to that decision it’s an easy one.

      Sky/TalkTalk are open to it because they already have big fixed line customer bases along with content ready to go. Vodafone’s last attempt at a fixed line service didn’t go well.

  3. Avatar Steven

    @dave

    Purchasing Liberty Global’s EU division would be “immensely expensive”, however after selling its 45% stake in Verizon Wireless to Verizon Communications for $130 billion USD, it’s hardly short of cash, and by its recent acquisitions, is eager to expand and invest.

    Vodafone has majority-owned mobile networks in the Czech Republic, Germany (where Vodafone also is the majority owner of Kabel Deutschland), Hungary, Republic of Ireland, the Netherlands, Romania and the UK, where Liberty has also Cable TV/Broadband/Landline Phone operations, which would enable Vodafone to make cost savings (by combining operations), and offering quad-play to its customers in these locations.

    Vodafone clearly has the desire to offer (true) quad-play services, with its recent acquisitions of TelstraClear (New Zealand), Kabel Deutschland and ONO (Spain).

    Vodafone laying (or having Fujitsu/anyone else) a new FTTP network outside of Virgin existing footprint (in the UK) would be pointless for numerous reasons, including:

    *(as stated by Ignitionnet) vast expense, and long time-scale.

    *Virgin (and its predecessors) having cherry picked high density urban areas to foll out its FTTN network, whilst ignoring rural, and low density areas where return on investment would be low (or non-existent).

    By purchasing Liberty Global’s EU division, Vodafone wouldn’t just be purchasing (near instant) access to existing infrastructure, they would be purchasing a huge existing customer base, and access to staff and expertise, among others.

  4. Given the way Vodafone treats its suppliers (120 day payment terms are “standard” – and even then they still do not pay on the 120th day) I suspect they would find it hard to deliver on a major fixed network rollout.

  5. Well, this news has been heard that Fujitsu has been paying the FTTP network cost amount. but there is doubt about the area it is covering.

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