Vodafone wins approval to acquire Liberty Global assets in multiple European markets

News

After the European Commission's approval to buy operations in Germany, Hungary, Romania and the Czech Republic, Vodafone will become one of the largest telco groups in Europe.

The proposed transaction was announced 9 May 2018 is worth an estimated €19.0 billion.

The parties expect the transaction to be completed by 31 July.

It is one of the biggest telecoms takeovers in the last ten years and some are viewing it as the beginning of a wave of consolidation in Europe, previously generally opposed by pan-European and national regulators.

Vodafone Group’s CEO, Nick Read, commented, “With the European Commission’s approval of this transaction, Vodafone transforms into Europe’s largest fully-converged communications operator, accelerating innovation through our gigabit networks and bringing greater benefits to millions of customers in Germany, the Czech Republic, Hungary and Romania. This is a significant step toward enabling truly digital societies for our customers.”

German market

In Germany, Vodafone pledges to deliver gigabit mobile speeds to 20 million people by 2021 and fixed gigabit connections to 25 million households by 2022.

Further, it says the combined company will be well placed to help deliver the German government’s digital ambitions (Germany lags much of the rest of Europe in building out digital infrastructure), providing sustainable and effective competition and choice in digital infrastructure and converged services.

Previously, Vodafone entered into a wholesale cable agreement to provide broadband services to Telefónica Deutschland, with download speeds of up to 300Mbps.

Deutsche Telekom, Telefónica Deutschland and some German broadcasters had submitted arguments to the Commission against the acquisition.

Central and Eastern Europe

Vodafone was rather less definite about its targets in the Czech Republic, Hungary and Romania. It said transaction will “bring forward” the provision of converged communications services in these countries, increasing competition and customer choice.

However, it did not provide a timetable for this progress, saying in a press statement,  “In these markets, the combined businesses will upgrade their fixed gigabit networks to reach over 6.4 million homes (39% of total households) in the coming years”.

Cost and other efficiencies

Vodafone predicts that the acquisitions will generate cost and capex synergies “with a net present value of over €6 billion after integration costs, and revenue synergies with an NPV exceeding €1.5 billion from cross selling to the combined customer base”.

“With the standalone growth potential of the acquired assets, these synergies support double-digit free cash flow per share accretion (before integration costs) from the third year post completion for Vodafone Group.”

Following the European Commission’s approval, which is conditional on the implementation of the agreed remedy package, the transaction is now expected to complete by 31 July 2019.

Liberty Global remains in Europe

Mike Fries, CEO of Liberty Global, stated, “It is good news for our employees in each market who will become part of a fixed-mobile national challenger with the strength and scale to take on national telco incumbents.”

Once the transaction is complete, Liberty Global will still have operations in Belgium, Ireland, Poland, Slovakia, Switzerland and the UK. Collectively they serve 25 million homes, with video, broadband and fixed-line telephony, plus six million mobile service subscribers.

Liberty Global also owns 50% of VodafoneZiggo, a joint venture in the Netherlands with 4 million customers subscribing to 10 million fixed-line and 5 million mobile services.