Credit: Vodafone

Vodafone puts the phone down on Liberty's Cable Cowboy

The telcos had been in merger talks, but it wasn't to be.

by Jack Torrance
Last Updated: 29 Sep 2015

After months of dilly-dallying it seems a deal between Vodafone and Virgin Media's parent company Liberty Global is no longer on the table. Liberty’s owner John Malone had been keen to sign some kind of merger with his competitor, most likely an asset swap - which would have made sense given their complementary strengths. But clearly Vodafone wasn’t keen.

‘On 5 June 2015 Vodafone confirmed that it was in the early stages of discussions with Liberty Global regarding a possible exchange of selected assets between the two companies,’ the British telco said in a to-the-point statement this morning. ‘Vodafone today announces that discussions with Liberty Global have terminated.’

The announcement hit Vodafone’s share price, which was down 3.9% this morning to 209.1p. We’ll have to wait until the Nasdaq opens this afternoon to see how it has affected Liberty Global, but it’s unlikely to be up – a deal with Vodafone could have seriously improved the company’s standing in some European markets.

Their competitors across the continent have been rapidly consolidating and diversifying in a rush to offer combined ‘quad-play’ TV, broadband, mobile and home phone packages. In the UK, Vodafone’s strong mobile business would have combined neatly with Virgin Media’s TV and fibre-optic broadband network, and they faced a similar situation in Germany.

It will be interesting to see where the companies go next. If Malone is dead-set on a deal he might want to play the field – Sky and TalkTalk could hear a knock on the door soon (though the former is laden with debt and the latter has played down the value of telco consolidation).

Either way it looks like Virgin Media's mobile business will remain a minnow in the face of competition from Vodafone and the newly merged BT/EE and O2/Three (unless those deals get blocked by the authorities, of course). The collapse will also add fresh impetus to Vodafone's plans to launch its own broadband and TV services.

This time last year it looked like the telecoms market was heading for a massive round of mergers. Now that Vodafone and Liberty's talks have collapsed it would only take some heavy-handed intervention from the competition regulators to put that to rest.

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