Vodafone abandons talks with Global Liberty because deal is too complex

Part of the complexity of any deal involved a potential de-rating of any spin-out from the asset swap

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Vodafone has abandoned its long-running talks with Virgin Media’s owner Liberty Global after the complexity of any possible deal scuppered a potential asset swap.

The mobile phone giant, led by Italian chief executive Vittorio Colao, yesterday said talks about swapping some of its businesses with the cable group Liberty had been terminated after nearly four months of negotiations. The US company, led by John Malone, the veteran US cable mogul snapped up Virgin Media for $23.3bn (£15.3bn) in 2013.

Talks were thought to be focusing on how Vodafone could link up its UK mobile network and Virgin Media, while Liberty’s German businesses appealed to Vodafone. Telecom firms have been scrambling to get into bed with each other to offer so-called quad-play packages of broadband, TV, landline and mobile services to consumers. The trend has been underscored by the £12.5bn takeover by BT of mobile firm EE earlier this year, and the swoop for O2 by the Hutchison Whampoa-owned network Three. Shares in Vodafone fell 4.8 per cent, or 10.45p, to 207.2p yesterday.

Vodafone stock had already weakened earlier this month after Mr Malone, who has been dubbed the Cable Cowboy for his dominance of the sector, confessed that both sides were struggling to get a deal done due to its complex nature. “We haven’t been able to figure out a way to do that that’s mutually successful,” he said. 

Part of the complexity of any deal involved a potential de-rating of any spin-out from the asset swap, plus the limited amount of cash Liberty could stump up to finance a deal, according to Royal Bank of Canada.  

“This probably is the end of the deal, although some have speculated whether Sky and Vodafone could do something,” one Vodafone shareholder said. 

But City analysts were still bullish that a Vodafone-Liberty deal would go ahead at some stage, hinting a full-blown merger between the two firms could be on the cards. “Today’s statement does not prevent discussions re-starting at any stage. We think investors may come to believe that it represents a delay, not the end of the process,” Jefferies’ analysts said. 

Any deal would be the latest in a long line of takeover moves by Mr Malone, a long-time rival of Rupert Murdoch and a serial deal maker. This summer he took over Time Warner Cable for $55bn.

We haven’t been able to figure out a deal that’s mutually successful