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Liberty Global-BASE Deal Gets EU Regulatory Clearance

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Yesterday, European cable MSO (multi service operator) Liberty Global Plc.LBTYA received the final nod from the anti-trust regulatory body, European Union (EU) Competition Commission, to close its planned purchase of Belgian telecom operator BASE N.V. Notably, in Apr 2015, Liberty Global had entered into an agreement to take over BASE from its current owner Royal KPN N.V. for €1.325 billion (roughly $1.48 billion).

In Oct 2015, EU launched an in-depth investigation under EU Merger Regulation to assess whether the proposed deal will harm the competitive landscape of the Belgian wireless market. At present, the Belgian wireless market is served by four wireless operators. Apart from BASE, Proximus and Orange ORAN controlled Mobistar are two other major carriers. The Telenet brand, operated by Liberty Global, is the fourth major carrier in the country.

Telenet primarily offers cable TV and high-speed broadband services. However, Telenet also acts as a mobile virtual network operator (MVNO) offering wireless services using Mobistar's network infrastructure. The primary concern of the EU telecom regulatory authorities was that if Telenet and BASE merge, the total number of wireless service providers will come down to three. The merged entity - Telenet and BASE - and Mobistar will enjoy 30% market share each while Proximus will command a major 40% market share.

Therefore, the consolidation of wireless carriers will lead to a much diminished choice of operators and higher prices for customers. Additionally, after the merger, BASE may no longer offer its network to be used by other MNVOs.

Liberty Global's Promises to EU

Liberty Global has decided to give up some BASE assets in order to obtain the regulatory approval. This involves selling BASE's JIM Mobile brand and its 50% stake in another mobile brand, Mobile Viking, to Belgian rival and radio station operator Medialaan. The intention is to help Medialaan become a full-fledged MVNO operating on BASE's network and thereby convince the EU regulator that the deal will not hurt competition. According to the EU Competition Commission, these measures taken by Liberty Global adequately address all regulatory concerns.

This type of tactics to ensure regulatory approval is not new to Liberty Global. In Nov 2014, the company had acquired full control of Ziggo N.V., the largest cable MSO in the Netherlands, where Liberty Global had existing operations under the UPC brand. To complete the takeover, the company vended its premium pay-TV channel "Film1". In addition, Liberty Global provided an assurance that it will not prevent online video streaming service providers such as Netflix Inc. NFLX from accessing its web (Internet) network either contractually or technically for eight years.

In a separate development, Bloomberg recently reported that British telecom giant Vodafone Group Plc. VOD is in talks with Liberty Global for a possible merger of their operations in the Netherlands. Notably, last year, the two companies had also been negotiating on a series of transactions including global asset swaps. However, the merger negotiations were abandoned after the companies failed to reach an agreement on valuations.

Liberty Global currently carries a Zacks Rank #3 (Hold).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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