The deal marks a substantial gain for Vodafone, with these assets accounting for 28 percent of Liberty Global’s consolidated operating cash flow last year. Vodafone claims the convergence of assets will mean it serves the largest number of mobile customers and households across the EU, and will help it to challenge dominant domestic players in these markets.
Vodafone Group chief executive Vittorio Colao said the transaction will create “the first truly converged pan-European champion of competition,” providing cable/fibre services to 54 million homes with a total reach of 110 million homes and businesses.
In Germany, Vodafone is hoping to challenge the current dominance of Deutsche Telekom, whose CEO Tim Hoettges said the deal would distort competition in Germany and create “a giant preening with its convergent technology”. One of Vodafone’s principle aims is to roll out Gigabit-speed broadband connections to 25 million households by 2022.
Meanwhile in Central and Eastern Europe, Vodafone’s next generation network (NGN) coverage will expand to 33 percent of homes in the Czech Republic, 43 percent in Hungary and 41 percent in Romania. The company says its assets are very complimentary with Liberty Global’s in this region, with Liberty Global concentrated on TV and broadband and Vodafone concentrated on mobile.
Liberty Global’s CEO Mike Fries echoed Colao’s sentiments. “In each of these markets, the combination of Liberty Global and Vodafone’s businesses will transform the competitive landscape and bring a new level of convergence to customers. Now more than ever, Europe needs strong competition from scaled national challengers willing and able to invest in next-generation wireless, video and broadband services.”
The deal will not only shake up competition in the four markets, but will reshape Europe’s media landscape, and will come under review from European competition authorities. A report released by Digital TV Research back in 2016 found that four companies alone controlled over half of Western Europe’s pay TV subscribers, two of which were Liberty Global and Vodafone. Vodafone currently sits just behind Deutsche Telekom as the second largest European telecoms company.
Liberty Global meanwhile is left with operations in the UK and Ireland, Belgium, Switzerland, Slovakia and Poland.
The company has been reshaping its own business across Europe recently, seeking to focus on a reduced number of markets. Liberty Global has been looking for acquisition opportunities in Poland and is reportedly in discussions with Switzerland’s Sunrise Communications Group AG about a potential partnership, while it also sold off its Austrian operations to T-Mobile Austria last year.
The deal could also have potential implications for Sky’s addressable TV advertising offering, AdSmart. Sky agreed a deal with Liberty Global’s Virgin Media last year to roll out AdSmart on Virgin set top boxes in the UK. As Sky starts rolling out AdSmart across Europe, it could seek to strike similar deals, which could have huge reach if extended to the combined pay TV audiences of Vodafone and Liberty Global. However, this relies on Vodafone being open to such an agreement.