By Simon Zekaria
LONDON-- Vodafone Group PLC said Friday it is in talks with
Liberty Global PLC over an "exchange of selected assets," throwing
the two European powerhouses back into the center of a recent
frenzy of European television and communications deal making.
In a release Friday, British telecommunications giant Vodafone
said talks were in early stages, and it ruled out any discussions
over a full-blown merger with Liberty Global, a U.S.-based cable
operator controlled by John Malone and focused on Europe. In recent
days, Mr. Malone publicly flirted with the possibility of such a
tie-up, lifting Vodafone shares.
Vodafone, based in Newbury, England, didn't detail the
discussions in terms of types of assets under consideration or
geographic locale, except to describe them as in "early stages." It
said there is no certainty that any transaction will result from
the talks.
Liberty declined to comment.
Last month, Mr. Malone, the American billionaire media mogul and
Liberty Global chairman, said Vodafone would be a "great fit" with
his cable operator, which is the largest in Europe by number of
subscribers.
Friday, shares in Vodafone--the world's second-largest wireless
operator by customers--rose 1.4% in early trading, valuing it at
GBP65.8 billion ($100.8 billion). Liberty has a market value of
$46.2 billion.
Prior to Mr. Malone's comments, Vodafone Chief Executive
Vittorio Colao had declined to comment on any talk of a deal with
Liberty, while emphasizing Vodafone's "organic" growth strategy,
based on heavy spending on wireless and fixed networks in Europe,
diversifying its media offerings and growing its footprint in
emerging markets such as India and South Africa.
European telecom and cable operators have embarked on a frenetic
wave of consolidation in recent years, eager to benefit from the
so-called "quadruple-play"--offering services that encompass fixed
telephony, mobile, Internet broadband and pay-television. The
packaged offerings are aimed at boosting subscriber revenue and
winning consumer loyalty.
Over-the-top streaming platforms such as Netflix Inc. have also
started to eat into their potential market, adding pressure to bulk
up. The continent's telecom players have suffered in recent years
from fragmented markets across Europe and slow growth, which hasn't
picked up much since the depths of the global economic crisis and
Europe's painful recession.
Liberty Global, with headquarters in both Englewood, Colo., and
London, operates in some of Europe's biggest markets, including
Germany, the Netherlands and the U.K., where it owns Virgin Media
Inc. The lion-share of Vodafone's profit and sales also come from
the continent, with a focus on Germany, Italy and Spain.
Liberty Global has been on the acquisition hunt in recent years
to snap up cable operators in Europe, where it has the majority of
its broadband networks. For its part, Vodafone has acquired
fixed-line assets in Germany and Spain to shore up its flagging
mobile business in Europe and bolster its position as a unified
media player in a rapidly-evolving market of bundled services.
Liberty last month agreed to acquire its own mobile business to
combine with existing cable operations through an offer for Base,
the Belgian unit of Dutch telecom group KPN.
Talk of a Vodafone-Liberty deal in some form is nothing new, but
analysts say tough trading for Vodafone in recent times--and a
multibillion-dollar capital spending effort aimed at its
networks--has raised pressure for a tie-up between the groups.
Write to Simon Zekaria at simon.zekaria@wsj.com
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