Vodafone 'nears' deal for Liberty Global cable networks

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Vodafone could agree a deal to take control of Liberty Global’s cable networks in Germany and Eastern Europe for €16.5 billion within the next two weeks, according to the FT.

The two firms have been engaged in discussions for the best part of three years, with talks first held in 2015 about a possible exchange of assets. Those ended without agreement but in 2016, the two firms agreed to merge their mobile and cable operators in the Netherlands in a bid to take on incumbent KPN.

Vodafone has invested significantly in fixed assets in recent years, both through the construction and acquisition of superfast broadband networks, and sees the convergence of mobile and fixed as essential for its future prospects.

Consolidation

Indeed, market fragmentation and challenging regulatory environments have been cited by many European operators as causes for concern as traditional revenue streams are being squeezed. This has made it difficult to invest in new network technologies like 5G and fibre to the premise (FTTP).

Vodafone wants to consolidate several European territories so it can achieve the economies of scale that would allow it to rival the US and Asian telecom giants who are able to justify the investment needed in network upgrades.

Liberty Global has been consolidating the European cable market for some time with operations in 12 countries, including in the UK where it bought Virgin Media for around £15 billion back in 2013.

It owns Unitymedia in Germany, which itself has been formed through the purchase of several formerly independent regional operators created when incumbent Deutsche Telekom was forced to spin off its cable assets in the early 1990s.

However Deutsche Telekom CEO Tim Hottges has already voiced his opposition to the tie-up, arguing it would give Vodafone too much power in the German market, leading to a war of words between himself and Vittorio Colao, his counterpart at Vodafone.

The UK has not been a market under serious discussion, but earlier this year Colao refused to rule out the possibility it could be added into the mix.

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