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Vodafone teases with Liberty Global talks confirmation

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Vodafone has confirmed it is in preliminary discussions with Liberty Global over an acquisition of some measure.

Details are very thin on the ground at the moment as this announcement doesn’t seem to be anything more than a water-calming exercise. Rumours of two of Europe’s largest telcos coming together have been swirling around for years, though the announcement could be seen as a confirmation of what a lot of people have been expecting for some time; Liberty Global is growing tired of Europe.

With interest surrounding European assets growing and Liberty Global seemingly granting more attention to the recently spun out LATAM business, it might be seen as a good time to offload a couple of burdensome assets.

“Vodafone confirms that it is in early stage discussions with Liberty Global regarding the potential acquisition of certain overlapping continental European assets owned by Liberty Global,” Vodafone said in a statement.

“There is no certainty that any transaction will be agreed, nor as to the terms, timing or form of any transaction. Vodafone is not in discussion with Liberty Global regarding a combination of both companies.”

The statement quashes any belief the two would merge into a mega-telco, but it is consistent with recent divestments made by Liberty Global. Last year it was announced Deutsche Telekom would be acquiring Austrian cable provider UPC from Liberty Global in a deal valued at roughly €1.9 billion. At the time the move was viewed as a declutter exercise to remove some regulatory concerns should the Vodafone/Liberty Global merger rumours re-emerge.

What is worth noting is this is not an asset-swap discussion either, as was earlier reported by news outlets. This is very much Vodafone on the acquisition scent, though it is very early days. Vodafone has not put forward any time lines on the deal or expectations. It might well just dissolve into nothing as previous talks have.

That said, a deal would bolster Vodafone’s European footprint, while also decreasing Liberty Global’s exposure in the European market. While certain areas of Liberty Global’s European business has been underperforming in recent quarters, fingers are regularly pointed at Virgin Media in the UK for example, Vodafone has been making efforts to improve its broadband business over the last 12 months or so. We don’t want to make any wild predictions just yet, but there does seem to be beneficial crossover in certain areas.

Vodafone mentions ‘overlapping’ assets in the statement, therefore the list of potential acquisitions does get a bit slimmer. Virgin Media in the UK is not an option. Considering the stink which would be kicked up by competitors over competition claims, the snub it would place on Vodafone’s relationship with CityFibre and the price tag of absorbing such a business, this would cause more hassle than anything else.

Germany is another option, though Vodafone does have a solid presence in the market already. This is another region which would depend on Vodafone’s strategic needs and whether Liberty Global can fill the holes in the geographical presence. Hungary, Czech Republic and Romania are the final places where a deal could happen.

We wouldn’t expect a deal in the near future as Vodafone emphasised the embryonic stages of these talks.

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