Vodafone and Liberty should consider merger

If Vodafone Group and Liberty Global really want to dominate the phone, cable and wireless market in Europe, they should quit competing and try merging.

The companies were among large cable and phone operators that gobbled up smaller players in more than $200bn of European deals since 2011 to gain customers and market share.

A merger of Vodafone and Liberty would be the next logical step, says Bank of America.

Vodafone CEO Vittorio Colao said last week that chairman John Malone’s Liberty could be a good fit at “the right price.” A deal would create the biggest company in Europe selling bundled packages of mobile, phone, internet and TV services.

A combined company could see a 3.2% jump in earnings per share from the deal by next year, were Vodafone to offer London-based Liberty a 20% premium, or more than $80bn including debt, and pay for half in cash, according to Bloomberg Intelligence analyst Erhan Gurses.

Acquirers paid an average premium of 20% for cable assets in the past five years, he says.

“It makes a ton of sense because Vodafone just bought cable companies in Germany and Spain and there’s the sense that once you start on this track you don’t stop,” says Amy Yong, a media analyst at Macquarie Capital in New York.

“At the end of the day, Mr Malone is not emotional about business. He’s rational, and at the right price he would obviously let Liberty go.”

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Source: BDLive

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