Vodafone Ponders Major German Cable Market Expansion - InformationWeek

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11:45 AM

Vodafone Ponders Major German Cable Market Expansion

As Liberty Global completes its purchase of Virgin Media, London-based Vodafone considers swoop on Germany's biggest cable provider.

As the European communications market prepares for John Malone's Liberty Global, which is in the process of absorbing Britain's Virgin Media, U.K.-headquartered Vodafone is exploring an expansion into the German market.

Vodafone, one of the world's largest mobile communications companies by revenue with approximately 404 million customers worldwide, confirmed Wednesday that it has approached Kabel Deutschland, Germany's biggest cable provider, regarding a possible buyout offer, although both companies stated, "There is no certainty that any offer will ultimately be made nor as to the terms on which any such offer might be made."

Kabel Deutschland offers high-definition (HD) digital and analog TV, pay TV and DVR, video-on-demand, broadband Internet and fixed-line phone services via cable, as well as mobile services in cooperation with an industry partner, in the majority of German states. It reported sales of €1.7 billion ($2.3 billion) in the year ending in March 2012.

[ Is BT taking advantage of U.K. taxpayers to fund its rural broadband project? Read U.K. Auditors Slam BT Rural Broadband Project. ]

The two firms made the announcement in response to a story in Wednesday's Financial Times that reports a purchase price for Kabel Deutschland of €7 billion ($9 billion) is already on the table. Other sources, including Reuters, suggest the asking price may be closer to €10 billion ($13 billion). In any case, the two companies had already been in talks in February and most commentators expect some deal to be struck.

Vodafone's leaders recently set a clear directive that the company needs to move beyond wireless and mobile to a more complete TV, landline and broadband proposition (a la Virgin in the U.K., of course) -- a path that implies acquisition of suitable candidate service providers such as Kabel.

Meanwhile, earlier this month Vodafone announced that it would double its investment in its U.K. LTE/4G strategy to £900 million ($1.3 billion).

It is possible that Malone's Liberty Global team might also put in a bid now that Kabel is openly in play, although it may be busy consolidating its most recent European expansion. Having completed its $24 billion stock and cash acquisition of Virgin last week; Liberty Global now provides more than 47 million video, voice and broadband services to 25 million customers in 12 European countries.

"With superior network capacity, the fastest broadband speeds and innovative digital TV platforms, we've never been more excited about the growth potential and strategic direction of our business," said Liberty Global president and CEO Mike Fries in that announcement.

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