Talks between Vodafone and Liberty Global about exchanging assets to better compete in Europe’s converging mobile, broadband and TV markets collapsed yesterday because they could not agree on the value of their businesses.
Vodafone, the world’s second-biggest mobile operator, said in June it was considering swapping some assets with Europe’s biggest cable company, a move that would enable the groups to sell packages of mobile, fixed-line, broadband and television increasingly offered by rivals.
Liberty chairman John Malone, who saw the companies as a “great fit”, said earlier this month they were struggling to progress with the plan, telling Bloomberg that “conceptually there could be some real value created but realistically we haven’t been able to figure out a way to do that that’s mutually successful”.
Both sides confirmed yesterday that negotiations had terminated.
The talks foundered on a failure to agree the relative value of assets on both sides, according to a person close to the discussions.
“We have not got there today, but we are not closing the door on potential discussions in the future,” the person said.
Companies struggling to progress with plan
Shares in Vodafone, which had fallen 10 per cent since the talks were revealed in June, were trading down 3.7 per cent at a four-month low of 209.5 pence at 0745 GMT.
Liberty Global, down eight per cent in the same period, closed on Friday at $48.
Analysts at Jefferies, noting that the talks could resume, said they continued to see Vodafone as having weak stand-alone prospects.
“Today’s news will surely disappoint near-term, but we think investors may come to believe it represents a delay, not the end of the process,” they said.
The companies have never specified which assets were being discussed, but bankers and industry analysts said in June the German and British markets would be the top of the agenda.
Vodafone and Liberty are first and second in the German cable television markets, owning Kabel Deutschland and Unity Media respectively.
The talks included Liberty Global’s German cable assets, and cable assets elsewhere in Europe, according to the person close to the matter.
Analysts had said a tie-up in Britain, where Liberty owns cable and broadband company Virgin Media, would have made sense.
Vodafone is facing an acceleration in convergence in its home market, after Britain’s biggest fixed-line and mobile operators BT and EE agreed to merge earlier this year.