Vodafone Buys Liberty Global’s CEE Operations

Vodafone has agreed to acquire Liberty Global’s operations in Germany, the Czech Republic, Hungary and Romania for an enterprise value of 18.4 billion euros. This is expected to comprise approximately 10.8 billion euros of cash and 7.6 billion euros of existing Liberty debt, subject to completion adjustments.

Liberty’s Unitymedia is the second largest cable operator in Germany, providing services to 7.2 million customers. Liberty Global’s UPC Czech and UPC Hungary are the largest cable operators in the Czech Republic and Hungary, while UPC Romania is the second largest NGN operator in Romania. Together, the three CEE companies provide services to 2.4 million customers.

The deal transforms Vodafone’s fixed line and convergence strategy in key CEE markets, complementing Vodafone’s existing mobile operations in the Czech Republic, Hungary and Romania. In these markets, the combined businesses will reach over 6.4 million homes (39 per cent of total households) and will serve 15.8 million mobile, 1.8 million broadband and 2.1 million TV customers.

Vodafone Group Chief Executive Vittorio Colao said: “This transaction will create the first truly converged pan-European champion of competition. It represents a step change in Europe’s transition to a Gigabit Society and a transformative combination for Vodafone that will generate significant value for shareholders. We are committed to accelerating and deepening investment in next generation mobile and fixed networks, building on Vodafone’s track record of ensuring that customers benefit from the choice of a strong and sustainable challenger to dominant incumbent operators. Vodafone will become Europe’s leading next generation network owner, serving the largest number of mobile customers and households across the EU.”

“Combining the operations of UPC and Vodafone in Romania will lead to the creation of an important player offering combined services which will boost competition on the telecom market,” said Mihnea Radulescu, boss of UPC Romania. “Consumers will have more choice, and we should see an increase in the rhythm of investment in the telecom industry.”

The deal is subject to review by and approval from the European Commission, but Vodafone views itself and Liberty Global as being highly complementary in each country, with limited overlap and, it feels, no negative impact on competition.

“In Germany, there is no geographic overlap between Vodafone’s cable network and Unitymedia’s cable network; the two companies operate their cable businesses in different parts of the country, and serve different customers. The combination of these complementary cable networks does not, therefore, reduce customer choice for TV or broadband. Customers (including housing associations) will continue to have a range of alternatives. For TV, these include satellite (which accounts for the largest proportion of the TV segment of the German market), cable and broadband internet streaming/download offerings,” read a Vodafone statement.

In the Czech Republic, Hungary and Romania, Vodafone is primarily active in the mobile segment of these markets and has no meaningful presence in each country’s fixed line or TV segments; Liberty Global is primarily a fixed line and TV operator with little or no mobile activities.

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