Vodafone today launched a £6 billion-plus move for German cable operator Kabel Deutschland in a fresh sign of intensifying competition in the telecoms sector as phone, broadband and TV services converge.
An admission that it “has made a preliminary approach” for Kabel Deutschland saw shares in the British mobile giant take a fall.
Vodafone has long been linked with a possible move for Kabel Deustchland. However, City analysts have been focused instead on the possibility of Vodafone selling its 45 per cent stake in Verizon Wireless, America’s biggest mobile carrier, in a deal worth upwards of $100 billion (£63.85 billion).
The Vodafone-Kabel deal involves two of the telecom industry’s biggest names as Vittorio Colao, long-serving chief executive of Vodafone, negotiates with Kabel Deutschland chairman Tony Ball, former boss of British pay-TV giant BSkyB.
Vodafone did not give details about the value of any offer it might make for Kabel Deutschland.
Shares in the German firm leapt nearly 8 per cent, taking its stock market value to €7.13 billion (£6.04 billion). The stock has already climbed by three-quarters in the last year on takeover speculation. Vodafone shares slipped 8.63p to 183.33p — although part of the drop was because the stock went “ex-dividend”, worth 6.92p a share.
Vodafone is already a market leader in mobile in Germany after its huge, £112 billion merger with Mannessmann in 2000 — a deal that proved to be hugely over-inflated.
Andrew Hogley, analyst at Espirito Santo, said Vodafone was looking to buy Kabel Deutschland now because the British firm lacks much presence in broadband or pay-TV.
Consumers are increasingly looking to one company to provide phone, broadband, mobile and TV — known as a “triple play” or “quad play”, he said.
“Triple-play operators are increasingly taking share in mobile, whereas mobile operators including Vodafone have failed to win significant share in the triple-play segment.” Hogley added there would be “significant synergies” for Vodafone if it bought Kabel Deutschland.
Vodafone’s move is the latest in a wave of takeovers across European telecoms. American rival Liberty Global has just bought British broadband, phone and pay-TV operator Virgin Media in a £15 billion deal.
Analysts were speculating today that John Malone’s cable giant Liberty might step in and create a bidding war for Kabel Deutschland.
Meanwhile, BSkyB and BT are engaged in a fierce price tussle over Premier League pay-TV and broadband. In a further twist, Ball is a non-executive director of BT as well as Kabel Deutschland.