EC Clears Way for Vodafone to Become Western Europe’s Largest TV Operator

Vodafone/Liberty GlobalThe European Commission this morning announced that it’s cleared Vodafone’s proposed €18 billion takeover of Liberty Global’s cable businesses in Germany, Hungary, Romania and Czechia, subject to certain conditions. The deal, which is expected to now complete by July 31st, will add substantial assets to what was already one of Europe’s largest cable operators. Following the completion, Vodafone says it will have 22.1 million TV customers across 13 European countries, making it Western Europe’s largest TV operator by subscriber count, going by Digital TV Research’s forecasts. Sky, the closest rival, doesn’t specify exactly how many TV subscribers it has, but in its most recent financial report said it has 23 million customers overall – given that this includes non-TV subscribers, it seems likely that Vodafone will overtake it.

Vodafone is taking on a somewhat troubled set of businesses – Liberty Global reported in its Q1 results this year that rebased revenues for those businesses were down 2.6 percent year-on-year, performing worse than the rest of the company. But Vodafone believes it can turn these units around. “The transaction is expected to generate cost and capex synergies with a net present value of over €6 billion after integration costs, and revenue synergies with an NPV exceeding €1.5 billion from cross selling to the combined customer base,” said Vodafone CEO Nick Read.

However while the merger will give Vodafone a wide reach across different European markets, the plan is still to keep TV offerings separate in different markets. “Obviously every market is different, and they have different legal requirements on content, and also different audience tastes,” a Vodafone spokesperson told VAN. “So there’s going to be no change to our content strategy when it comes to local markets.”

To secure the Commission’s approval, Vodafone has agreed to a number of “remedies” to ease concerns about the affects the deal could have on Germany’s broadband and TV markets. The Commission said that the merged company might have too much power over German TV broadcasters, and could prevent them from creating new over-the-top (OTT) services. It also said it was concerned about diminished competition in the market for retail supply of fixed broadband services which would result from the deal.

To address these concerns, Vodafone has agree to four measures:

  • It will give Telefónica access to the merged entity’s cable network in Germany.
  • It won’t contractually restrict broadcasters from distributing their content via their own OTT services.
  • It won’t increase feed-in transmission fees paid by free-to-air broadcasters in Germany.
  • It will continue to carry free-to-air broadcasters’ HbbTV signals.

The Vodafone spokesperson said that these four measures won’t change the company’s strategy. “Fundamentally what we’ve done is given commitments to the broadcasters not to do things which we weren’t planning to do anyway. We’ve just formally committed that we won’t do them, so there’s no real change.”

The Commission believes that these commitments are sufficient to alleviate competition concerns. “We have today approved Vodafone’s purchase of Liberty Global’s business in Czechia, Germany, Hungary and Romania subject to remedies designed to ensure that customers will continue enjoying fair prices, high-quality services and innovative products,” said Margrethe Vestager, the European Commissioner for Competition.

Not everyone agrees. Deutsche Telekom, Vodafone’s main rival in Germany, has contested the proposed takeover since it was announced last year, and said today that the remedies proposed are not sufficient. “Cable monopolies will continue to be created in the cable-served areas – supported by the privilege of automatic inclusion of cable TV fees in ancillary rental costs (Nebenkostenprivileg),” the company said in a statement. “This closes off an important market not only to Deutsche Telekom, but also to the entire sector.” Deutsche Telekom also claimed that the merger will complicate the roll out of optical fibre in Germany.

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