Vodafone Group Plc Said To Be In Talks With Liberty Global For A Possible Merger

Vodafone and Liberty Global are reportedly engaged in merger talks, according to Bloomberg

Vodafone Group Plc. (ADR) (NASDAQ:VOD) and Liberty Global Plc. (NASDAQ:LBTYA) might be considering a merger, among other transactions, Bloomberg reports, citing people close to the matter. Rumors of such a deal have been in the works since December last year, when Bloomberg flagged Liberty as a possible acquisition target for the British telecommunication giant.

The sources further said that discussions are at an initial stage currently and fairly informal. A potential deal could, however, lead to sensitive questions like who will manage the combined entity, including the position of Liberty Global?s billionaire chairman John Malone. Furthermore, a merger would lead to one of the biggest enterprise deals value-wise to date, with Liberty Global currently valued at around $89 billion and Vodafone worth $141 billion. The sources warned that considering the complex nature of the transaction and regulatory approval issues, there might be no merger after all.

Apart from an outright merger, the two companies may also consider combining their European assets, the sources added. It was also revealed that though the purchase of Liberty was the original plan of Vodafone CEO Vittorio Colao, he might also be content with buying out the company?s western European business. In a recent interview with Bloomberg, Mr. Malone had called Vodafone a ?great fit? for his operations in Western Europe.

?We?ve looked at that from our side and there would be very substantial synergies if we could find a way to work together or combine the companies with respect to Western Europe,? he had stated. It is believed that a deal with Vodafone, the world?s second-biggest mobile telecom company, would help Liberty Global to achieve its goal of shifting focus from media and broadband to wireless networks.

At the same time, Mr. Malone has been involved in expanding the company?s distribution network; a subsidiary called Liberty Broadband Corp (NASDAQ:LBRDA) has a 25% stake in cable services company Charter Communications, Inc. (NASDAQ:CHTR), which recently decided to buy the media firm Time Warner Inc (NYSE:TWX) for $55 billion. Liberty Global also added British cable operator Virgin Media to its portfolio in 2013 for $16 billion and Dutch broadband provider Ziggo NV last year.

Speaking on the benefits of a merger in markets such as those of Germany, UK, and Netherlands, Mr. Malone had said last month, according to Bloomberg: ?Is there a great fit in Germany? Absolutely. Is there a great fit in the U.K.? Absolutely. Is there a great fit in Holland? Absolutely.? ?There?s the promise of creating enormous shareholder value if we could work it out,? he had added.

Vodafone, on the other hand, seeks lesser dependence on its cell phone business after the aggressive pricing pressures faced in Europe. The company recently reported growth in its service sales for the first time in around three years, and it is expected that Vodafone may fall shy of analysts? expectations in its German-based operations.

?If we find things that make sense, whether it?s Liberty or Hellas Online or whatever, we will look and consider and if there aren?t, we continue with our organic strategy,? Mr. Colao said in a conference call last month. The latest Bloomberg report also says that Vodafone may also consider splitting its Middle Eastern and African operations, following an acquisition of Liberty?s European unit.