Vodafone confirms early talks with Kabel Deutschland

Vodafone Group said it has approached Kabel Deutschland in what could be a deal worth around €7 billion, thus confirming speculation it is still interested in buying Germany's largest cable operator despite its recent VDSL agreement with Deutsche Telekom.

"[Vodafone Group] confirms that it has made a preliminary approach to KD regarding a possible offer for the company," the operator said in a statement. The company added that there is "no certainty that any offer will ultimately be made nor as to the terms on which any such offer might be made."

Citing unnamed sources close to the matter, Bloomberg reported that formal talks between the two companies have not yet begun because Kabel Deutschland would first want Vodafone to come back with a higher price for the company.

Reuters noted that Vodafone had been pursuing a possible €10 billion ($13.3 billion) bid for the German company since earlier this year, while the Financial Times put the value of the deal at €7 billion based on Kabel Deutschland's market value. Citing unnamed sources close to the matter, Reuters  and Bloomberg reported that Vodafone has indicated to Kabel Deutschland it is willing to pay €81 to €82 per share.

An acquisition of the German cable group would significantly ramp up Vodafone's group-wide strategy to provide quad-play bundles of fixed and mobile services, and help it defend its market position in Germany in the face of competition from triple-play competitors.

France Telecom also recently said cable operators are interesting partners to support quad-play offers in different European markets.

"Wireless services in Europe are under tremendous pressure," wireless analyst Chetan Sharma, told Bloomberg. "They need to offer quad play to keep their customers for a longer period of time. As you start to bundle, you typically see the lifetime value of a customer increase by 50 per cent. It's harder for the customer to leave."

Some analysts had suggested Vodafone would have less interest in buying Kabel Deutschland in the wake of a deal it struck to use Deutsche Telekom's VDSL network to support its fixed-line offerings, but the UK-based group is clearly still interested in owning fixed assets in Germany.

Analysts at Espirito Santo told Reuters that there would be significant synergies for Vodafone from migrating a portion of its customer base on to Kabel Deutschland's cable infrastructure, possibly worth as much as €16 per Kabel Deutschland share.

Kabel Deutschland supplies 8.5 million German households with broadband, phone and TV services and employs 3,500 people.

For more:
- see this Reuters article
- see this FT article (sub. req.)
- see this Bloomberg article
- see this separate Reuters article

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