CCS Insight: Three UK merger would be ‘feasible’ for Liberty Global

Liberty Global

The ink is barely dry on Liberty Global’s recently approved deals to buy Base in Belgium and form a joint venture with Vodafone in the Netherlands, but rumours that the cable group will buy or merge with another European mobile operator continue to rumble.

In a research note following a meeting with Liberty Global CEO Michael Fries, Paolo Pescatore, director of multiplay and media at CCS Insight, noted:Rumours will continue to link Liberty Global with mobile operators in the UK, such as O2 or Three.”

In Pescatore’s view, a merger with Three UK “would certainly be feasible in line with CK Hutchison's deal with Wind in Italy, and could receive regulatory approval, given that BT's acquisition of EE was also formally ratified.”

Although Liberty Global already owns Virgin Media in the UK and offers mobile services via an MVNO, Pescatore pointed out that Virgin Media has yet to offer LTE services, “hampering its ability to compete in a cutthroat SIM-only market. Additionally, any acquisition would require significant long-term investment in spectrum and network rollout.”

Pescatore made the comments in a general overview of Liberty Global’s strategy, which he believes is of some concern because he thinks the group is not making the most of its cross-selling opportunities to existing customers.

“By placing greater focus on mobile connectivity and on content Liberty Global can differentiate its offerings in all markets,” Pescatore said.

Liberty Global focuses primarily on its existing MVNO arrangements and Wi-Fi networks elsewhere in Europe, where it operates in 12 markets in total. The Base and Vodafone Netherlands deals signalled something of a departure from that strategy, but do not appear to herald a wave of mergers or acquisitions.

Pescatore added that his discussions with Fries did indicate that Liberty Global has more deals in the pipeline. As things stand, its two strategic priorities are content and connectivity; it is now working increasingly with partners to produce exclusive original content for its cable customers, the analyst noted.

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