Vodafone investors open to European tie-up with Liberty Global

Some of the biggest investors in Vodafone say they are open to a European tie-up with Liberty Global, as the British company is now in a stronger position to negotiate a deal with John Malone's cable group.

Shares in the world’s second largest mobile operator hit a 14-year high last week after Liberty’s billionaire chairman Malone said a much-mooted union would be a “great fit” for his company.

The positive reaction stands in contrast to previous occasions when talk of a deal sent shares in Vodafone tumbling on fears that it, as the suitor, would overpay in order to snare Liberty, Europe’s biggest cable operator.

“There is a strategic rationale to the combination of the assets,” one top 10 shareholder in Vodafone said on condition of anonymity.

“And until last week, the market assumption had been that Vodafone was coming from a position of weakness. What has changed with John Malone’s comments is that the conversation between the two parties might actually be a more equal one.”

Vodafone, which has 446 million mobile customers in countries ranging from Albania to Ireland, Qatar, India, South Africa and New Zealand, has lost ground to some rivals in an industry-wide trend to provide internet broadband, TV, home phone and mobile services in one bundled product, known as quad-play.

It has already bought cable networks in Spain, Germany and Britain, with the higher-capacity network also helping to carry its mobile traffic. But some analysts believe a purchase of Liberty Global could enable the two companies to create the leading network in Europe in one go.

Liberty has also recently bought a mobile operator in Belgium, in a change of strategy after previously suggesting it did not need to own its own mobile operations and could instead rent capacity from rivals.

Liberty has a market capitalisation of about $49 billion and Vodafone’s is around £67.3 billion.

Analysts estimate that a deal could result in gross synergies of around £16 billion.

Reuters