Markets

Vodafone-Liberty Global Merger Talks Fail to Materialize

The merger negotiations between U.K. telecom giant Vodafone Group Plc VOD and cable TV behemoth Liberty Global plc LBTYA have come to an end after both the companies failed to reach an agreement on valuations.

The discussions mainly focused on a series of transactions such as global asset swaps, as stated by Vodafone earlier.

However, the companies have not been able to determine the value of the resources to be exchanged which would help derive the maximum synergies. Another major roadblock was the low level of diversification at Vodafone and the threats it faces from competitors in Europe as well as other markets.

Nonetheless, sources close to the matter have revealed that the companies might resume merger talks in the future.

Interestingly, Vodafone was particularly interested in Liberty Global's Western European operations. Meanwhile, Vodafone had been planning to vend its businesses in the Middle East and Africa.

On the other hand, an association with Vodafone would have allowed Liberty Global to offer quad-play bundled services including video, landline phone, broadband data (Internet) and wireless services. Liberty Global offers both basic and digital video services, telephony and high-speed Internet (broadband) offerings whereas Vodafone provides 4G LTE and LTE-Advanced wireless networks and fixed-line broadband.

Thus, a merger would certainly have helped the companies achieve economies of scale to remain competitive in certain markets, specifically Western Europe.

Meanwhile, over the last couple of years, the U.K. telecom sector has been witnessing a wave of consolidation. Also, introduction of latest network technologies has significantly intensified competition.

In Feb 2015, BT Group plc BT had entered into a definitive agreement with Orange SA ORAN and Deutsche Telekom AG to acquire a 100% stake in U.K.-based wireless operator EE. Moreover, in Mar 2015, Telefonica SA TEF divested O2, its wireless carrier in the U.K., to Hutchison Whampoa Ltd.

Meanwhile, Vodafone acquired the fixed broadband infrastructure of Cable and Wireless in Jul 2012 to strengthen its network in the U.K. Thus, Vodafone's recent endeavors reflect its interest in fortifying its footprint in Europe to stay abreast and also counter competition in the U.K. telecom sector.

Vodafone currently carries a Zacks Rank #4 (Sell).

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TELEFONICA S.A. (TEF): Free Stock Analysis Report

BT GRP PLC-ADR (BT): Free Stock Analysis Report

LIBERTY GLBL-A (LBTYA): Free Stock Analysis Report

VODAFONE GP PLC (VOD): Free Stock Analysis Report

ORANGE-ADR (ORAN): Free Stock Analysis Report

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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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