Vodafone Group Plc (VOD) Chief Executive Officer Vittorio Colao is considering a combination with John Malone’s Liberty Global Plc (LBTYA) to create a European phone, Internet and TV company valued at more than $130 billion, people with knowledge of the matter said.
The British phone company is holding internal deliberations and analyzing the financial and regulatory hurdles as well as investor support for a share-based transaction, the people said, asking not to be identified because the matter is private.
No formal negotiations with Liberty are under way, there’s no guarantee a deal will be reached, and valuation and regulatory issues remain key obstacles, the people said. In particular, Vodafone has concerns about the combined company’s debt levels and the reaction of its own investors to a deal, one of the people said.
The case for a combination has been strengthened after BT Group Plc, the former U.K. phone monopoly, entered talks to buy either Telefonica SA’s O2 unit or EE, the wireless carrier co-owned by Orange SA and Deutsche Telekom AG, two of the people said. The likelihood of a deal has also increased as Vodafone bolsters its fixed-line operations and Liberty moves toward offering mobile services in some markets, they said.
While Vodafone is examining several options in the wake of BT’s negotiations, Liberty remains the likeliest partner for a transaction, one of the people said.
Cable operator Liberty’s shares climbed 7.4 percent to $51.99 on Nov. 28 in New York. Vodafone fell 1.3 percent to 231 pence at 8:01 a.m. in London.
European Assets
Liberty, which owns Virgin Media in the U.K., has a market capitalization of $39.4 billion and $41.1 billion in total debt after a series of European acquisitions, according to data compiled by Bloomberg.
Vodafone, which has a market value of about 61 billion pounds ($95 billion), has been adding cable assets across Europe as the telecommunications market moves toward bundled packages combining TV, phone and broadband services. After agreeing to buy Germany’s Kabel Deutschland Holding AG for 7.7 billion euros ($9.6 billion) last year, it acquired Grupo Corporativo Ono SA of Spain. Colao, when asked in September whether Liberty Global would be a good fit for the wireless carrier, said he would consider buying it “for the right price.”
Representatives for Vodafone and Liberty declined to comment.
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