Vodafone-Liberty Global merger rumours continue to rumble

Liberty Global is reportedly still plotting a full merger with Vodafone even after the UK-based mobile operator last week confirmed talks on an asset swap but said it was not in discussions on a potential combination of the two telecoms giants.

Citing unnamed sources, the Telegraph said representatives of Liberty Global chairman John Malone have put together detailed plans on how the cable operator's businesses in Europe could be combined with Vodafone's networks in order to create a new multi-service giant on the continent.

It was also reported that associates of Malone have visited the UK on "multiple occasions" in the past month and have discussed the plans with leading Vodafone investors. The merger discussions are said to be taking place in parallel with the confirmed asset swap talks between Liberty Global and Vodafone itself.

Vodafone said last week that it was in the early stages of discussions with Liberty Global on the possible exchange of selected assets between the two companies, but said it was not in talks on a possible combination of the two companies.

The UK-based operator made its statement after Malone described a tie-up between the European cable giant and the mobile operator as a "great fit".

Major Vodafone shareholders have since said they would be "very open to the combination", and suggested the company should sell off networks in its more far-flung markets such as India, Turkey and South Africa to support a possible £120 billion (€164 billion/$183 billion) merger.

Speculation that Vodafone and Liberty Global could merge is certainly nothing new. Although obstacles exist, such a move would align with the strategy of both companies to offer quad-play plans combining fixed and mobile services.

Vodafone is understood to be particularly interested in Virgin Media in the UK, where the operator faces being sidelined as a result of a planned merger of Three UK and O2 UK, and BT's planned acquisition of EE.

Analysts continue to support a merger over an asset swap meanwhile. Jefferies International analysts said last week that they were sceptical about swapping assets in Western Europe and saw significant obstacles to such moves.

"Synergies would likely be substantially less than the US$20bn-30bn range that consensus believes a combination of Vodafone/Liberty Global European assets could deliver," Jefferies commented. "While we believe a combined entity with an unparalleled convergent footprint would warrant a premium trading multiple that would not necessarily be true of two separate entities with reined-back geographical ambitions or tied into an unwieldy JV."

For more:
- see this Telegraph article

Related Articles:
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Report: Shareholders urge Vodafone to offload networks, embrace Liberty Global merger
Liberty's Malone opens door to Vodafone tie-up
Reports: Vodafone mulls Liberty Global move as it considers UK options

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