Vodafone mulls deal with Liberty

Advisers 'war gaming' how to respond to BT strategy

Vodafone has called in advisers to consider its options given that BT is likely to take over one or other of the mobile phone groups EE and O2.

A possible merger with Virgin Media’s owner Liberty Global is one of several options being explored, it emerged last night.

One Vodafone source said its advisers were “war gaming” how to respond to the BT strategy so as to create a strong position in the all-important quad-play market – providing mobile, TV, broadband and fixed-line telephony to households in one package.

The emergence on Monday of BT’s talks with the two rivals has made it clear to Vodafone that it must act as the industry consolidates.

While a deal with the US tycoon John Malone’s Liberty Global could happen, it was only one of several options including a big push to supply television and internet into people’s homes through BT’s fibre networks, sources said.

This possibility is opening up because competition watchdogs would insist that BT allows other companies to use its fibre if it were to merge with either EE or O2.

Vodafone already has a fibre network following its takeover of Cable & Wireless Worldwide, Kabel Deutschland and Corporativo in Spain. However, analysts pointed out that teaming up with Liberty Global could create a more compelling, pan-European company, although monopoly regulators would make Vodafone dispose of some German networks.

The Bloomberg news agency cited a Vodafone source as saying that Liberty remained the most likely partner. Other sources said no approach was imminent though a deal could happen at some point.

Shares in Liberty, controlled by the billionaire tycoon John Malone, raced up 10 per cent in New York as investors reacted to the reports, which broke after London closed.