Liberty Global Plans Netherlands JV With Vodafone - Update
February 16 2016 - 5:53AM
Dow Jones News
By Ian Walker, Newley Purnell and Simon Zekaria
Liberty Global PLC is setting up a joint venture combining its
operations in the Netherlands with Vodafone Group PLC, the
U.S.-based cable operator said, in a bid to create a stronger local
presence amid mounting competition in Europe's telecoms market.
Vodafone--the largest global mobile operator after China Mobile
Ltd.--will pay Liberty Global, the Europe-focused operator
controlled by cable tycoon John Malone, EUR1 billion ($1.12
billion) as part of the deal. Liberty said after integration costs,
the 50-50 joint venture would be valued at about EUR3.5 billion in
terms of combined revenue and capital expenditures.
The tie-up would merge Liberty Global's cable and Internet
businesses--the largest in Europe by number of subscribers--with
Vodafone's mobile operations to create a Netherlands-wide
communications provider with more than 15 million subscribers,
Liberty Global said.
The companies said earlier in February that they were in talks
to create the joint venture, four months after discussions between
the firms collapsed.
The talks between Liberty and Vodafone are part of a frenzy of
European television and communications deal-making, with telecom
and cable operators eager to benefit from the so-called
"quadruple-play"--offering services that encompass fixed-line
telephony, mobile, Internet broadband and pay-television. The
packaged offerings are aimed at boosting subscriber revenue and
winning consumer loyalty.
Liberty operates in some of Europe's biggest markets, including
Germany, the Netherlands and the U.K., where it owns Virgin Media
Inc. Liberty has been on an acquisitions hunt in recent years,
looking to buy cable operators in Europe, where it has the majority
of its broadband networks.
Vodafone, meanwhile, has also been looking at European
acquisitions, and has purchased fixed-line assets in Germany and
Spain to shore up its mobile business and bolster its position as a
unified media player in the bundled-services market.
Like Liberty, Vodafone derives the majority of its profit and
sales from the continent, with a focus on Germany, Italy and
Spain.
Streaming platforms such as Netflix Inc. have also started to
eat into their potential market, adding pressure to bulk up. The
continent's telecom players have suffered in recent years from
fragmented markets across Europe and slow growth, which hasn't
picked up much since the depths of the global economic crisis and
Europe's painful recession.
Vodafone has a 32% share of core mobile revenue in the
Netherlands, compared with 39% for competitor Royal KPN NV. At the
end of last year it began legal action against KPN, alleging its
Dutch rival delayed the introduction of Vodafone's competing suite
of television, fixed-line broadband and fixed-line telephone
services in the Netherlands by three years.
Vodafone's chief executive said the move to form the joint
venture wasn't necessarily a model for bigger markets like the U.K.
and Germany.
"I don't believe in blueprints. Every country is different, and
the competitors are different," Vittorio Colao said Tuesday.
"Vodafone sometimes acquires assets, sometimes we accept partners.
There is no such thing as a blueprint."
Liberty, which is based in the U.S. but focused on Europe,
acquired KPN's Dutch cable rival Ziggo for nearly $10 billion in
2014.
Upon the third anniversary of the Liberty-Vodafone joint
venture, either party can initiate an initial public offering and
give the other the option to sell shares in any IPO. Each company
has also agreed not to sell, or initiate a sale of their interest
in the joint venture to any third party for four years, after that
they can sell their shares, subject to first refusal by the other
joint venture party.
The joint venture board will comprise three representatives from
both companies and two members nominated by a works council.
The tie-up is expected to close around the end of 2016 and will
be subject to regulatory approvals, Liberty Global said.
Liberty Global, with headquarters in both Englewood, Colo., and
London, reported Tuesday its financial results for the three months
and year ended Dec. 31. The firm's operating income for 2015 rose
5% from a year earlier to $2.3 billion.
Write to Ian Walker at ian.walker@wsj.com, Newley Purnell at
newley.purnell @wsj.com and Simon Zekaria at
simon.zekaria@wsj.com
(END) Dow Jones Newswires
February 16, 2016 05:38 ET (10:38 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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