Vodafone in talks with Liberty Global on asset swap, not merger

Fri Jun 5, 2015 12:49pm EDT
 
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By Sarah Young and Pamela Barbaglia

LONDON (Reuters) - Vodafone, the world's second biggest mobile company, said it is in early talks about exchanging selected assets with Europe's largest cable operator Liberty Global, which could enable each to better compete with rivals.

Analysts and sector bankers said the two most important countries for both firms where they overlap were Britain and Germany. They also both operate in Ireland, the Netherlands, Czech Republic, Hungary and Romania.

Vodafone, traditionally a mobile-only company, has been on the back foot in recent years as companies with access to mobile and fixed-line infrastructure such as Orange, Telefonica and Deutsche Telekom offer packages of services to customers in one bundle.

After weeks of speculation, Vodafone released a statement on Friday saying it was not in merger talks with Liberty, but was holding talks about a possible exchange of assets, without saying which businesses were being discussed.

"Whilst talks might yet lead to a full combination with Liberty, an asset swap would allow both parties to boost their respective positions in converging markets, and could still lead to a full combination over time," analysts at Deutsche Bank said.

In Germany, Deutsche Telekom has started selling mobile, Internet, TV and fixed-line telephony in one package and in Britain, BT will be able to do the same once it has completed the acquisition of the country's largest mobile operator EE.

Liberty Global, which has operations in 12 European countries, has a market capitalisation of $46 billion, while Vodafone's is 66 billion pounds ($102 billion).

An industry banker said he believed Vodafone's primary interest was in acquiring Liberty's UK arm Virgin Media, while the main attraction for Liberty was Vodafone's German business.   Continued...

 
Vodafone branding is seen outside a retail store in London November 12, 2013.   REUTERS/Toby Melville