Report: Vodafone could make bid for Kabel Deutschland within days
Vodafone could make a bid for German cable company Kabel Deutschland within days, according to a Bloomberg report, which cited an unnamed source. Meanwhile, some analysts are wondering if Vodafone could lose out to U.S. cable giant Liberty Global if the two firms become involved in a bidding war over Kabel Deutschland.
The Bloomberg report said that Vodafone's management, which wants to pursue negotiations, is waiting for Kabel Deutschland's earnings release, scheduled for Feb. 20, before starting any formal talks. Vodafone and Kabel Deutschland declined to comment, according to Bloomberg. Kabel Deutschland now has a €6.1 billion market value.
While industry reports indicate Vodafone is working on a plan to acquire the German cable company, some think that Liberty Global, despite its takeover deal with Virgin Media, could also be interested in Kabel Deutschland, according to the Guardian newspaper.
During last week's fourth quarter-conference call, that included analysts from Espirito Santo, Liberty Global said there is "compelling logic for consolidation in the German cable sector".
Liberty Global said that its dealing with Virgin Media would not stop it from pursuing other cable M&A opportunities within the European cable market, according to the analysts.
"In light of these comments we remain of the view that Liberty Global would be likely to consider making a counter offer should Vodafone bid for Kabel Deutschland, as has been speculated over the last few days," the Espirito Santo analysts noted, according to the Guardian.
Berenberg Bank analyst Paul Marsch said that any move by Vodafone would signal an end of the operator's pure-play mobile proposition.
"Is it better for Vodafone to spend maybe £7 billion on acquiring Kabel Deutschland, or to spend the same amount of money increasing Capex across its European footprint to ensure the very best network quality, the very best customer service, and the very best device portfolio and distribution?," asked Marsch, according to Economy News.
"Three years (and one German business unit CEO) later, it appears Vodafone could be changing its view, and is at least assessing the rationale for a cable acquisition," he added.
This view has the support of Espirito Santo analysts, claiming they can see the strategic rationale for such a transaction.
"We can also understand why Vodafone could potentially be looking at such a deal now," they wrote. "Vodafone has recently missed out on the opportunity to acquire cable assets in UK and Portugal, the threat of cable operators entering mobile markets has become more evident given Telenet's gains in Belgium, and Liberty Global, its likely rival for the asset, has just made its move for Virgin Media.'
However, Vodafone already has significant fixed- line assets in the German market from its former Arcor business. This unit had 3.4 million customers as at the end of 2012 and competes against Kabel Deutschland, which has around 14 million subscribers, according to the Guardian.
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