Vodafone is planning its next move to counter pending consolidation of the UK telecoms market, with reports suggesting that it is reviewing a possible acquisition of European cable operator Liberty Global, among others.
Citing unnamed sources, Reuters said internal discussions at Vodafone have picked up pace since BT said it was in talks to buy either EE or O2 UK to support its move into the mobile market and enable it to offer bundles of fixed and mobile services as part of a "quad-play" strategy. Hutchison Whampoa is also reportedly considering a rival bid for one of the two UK mobile operators.
Reuters also noted that Vodafone is considering other targets including TalkTalk, which recently unveiled plans to expand its quad-play offerings through a wholesale mobile network agreement with Telefónica UK. However, "Liberty is the obvious one that makes sense," the sources told Reuters. "Vodafone need fibre and that is what Liberty has."
Valuation and regulatory issues nonetheless remain key obstacles to any deal, sources told Bloomberg. Reuters further noted that a merger of the two companies would create a group with annual sales of $80 billion (€64 billion).
The acquisition of a cable operator would further enhance Vodafone's multi-service strategy in the UK. Indeed, it is certainly not the first time that the operator has been linked with Liberty Global, which owns cable operator Virgin Media: in September Vodafone CEO Vittorio Colao said Liberty Global could be a good fit for the UK-based operator at the right price, and also indicated that some sort of "transformational M&A" could be considered in the future.
Rumours over the weekend also suggested that Vodafone is set to acquire Tesco's video streaming service Blinkbox in a bid to enter the UK pay-TV market.
Vodafone UK has already unveiled plans to launch fixed broadband services in the first half of 2015, using a mix of its own fibre broadband network and wholesale lines supplied by BT.
Vodafone has a track record of buying cable and fixed assets to complement its mobile networks in Europe. The company recently completed the acquisition of 72.7 per cent of fixed broadband provider Hellas Online in Greece for €72.7 million ($90.5 million), and has already snapped up Kabel Deutschland in Germany and Ono in Spain. The company also previously acquired Cable & Wireless Worldwide in the UK.
For its part, Liberty Global has established mobile virtual network operators (MVNOs) to add mobile voice and data to triple-play bundles of voice, TV and broadband services.
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