NO DEAL as Vodafone and Liberty Global Talks Collapse

Plans for a gigantic European merger or asset swap between mobile giant Vodafone and fixed line cable operator Liberty Global (parent company for Virgin Media UK) look unlikely to proceed after talks between the two were terminated several months after they first began.

The possibility of a mega merger was first officially confirmed in June 2015 after several months of speculation (here). At the time it was claimed that some of Vodafone’s biggest shareholders had been putting pressure on the mobile operator to do a deal with Liberty Global.

In theory Vodafone would have benefitted from gaining access to a much bigger fixed line cable network, which would help it to compete with BT in the UK (BT are currently buying Vodafone’s UK rival EE) and on the flip side Liberty would have secured its own mobile platform. But such a deal is now very unlikely to materialise.

Vodafone has officially confirmed that their talks with Liberty Global have ended without agreement, which has already hit their share price (down 2% in early trade). On the other hand the news isn’t that much of a surprise, not least since Liberty’s US billionaire owner, John Malone, recently hinted to Bloomberg that the two were struggling to reach a mutually agreeable price.

Vodafone Statement – Discussions with Liberty Global have terminated
28 September 2015

On 5 June 2015, Vodafone Group Plc (“Vodafone”) confirmed that it was in the early stages of discussions with Liberty Global Plc (“Liberty Global”) regarding a possible exchange of selected assets between the two companies.

Vodafone today announces that discussions with Liberty Global have terminated.

It’s understood that several different ideas were discussed during the talks, but no agreement was reached on any of them. At the same time such a large deal would have created many complicated financial (e.g. Vodafone’s tax situation is highly complicated) and regulatory problems, although that’s never stopped Malone before.

The situation puts both operators back at square one, leaving Vodafone UK to be semi-dependent upon BTOpenreach’s national fixed line infrastructure for broadband. At some point Virgin Media will also probably need to swap their MVNO deal with EE to O2, Three UK or Vodafone; unless they want to stay linked with their biggest competitor when it comes under BT’s ownership.

On the other hand a door has been left open by both sides for future discussions.