Vodafone Challenges Telefonica and Deutsche Telekom with its takeover of Kabel Deutschland

Vodafone Challenges Telefonica and Deutsche Telekom with its takeover of Kabel Deutschland

Vodafone confirmed on Monday its intention to acquire the Germany’s largest cable operator Kabel Deutschland, announcing a takeover bid that values ​​the German group at 7.7 billion euros. Vodafone, which has been competing so far with Liberty Global for control of Kabel Deutschland, is offering 87 euros for each share (84.5 euros in cash plus a dividend of 2.50 euros).

According to the press released yesterday, the leadership of Kabel Deutschland has given its approval to the transaction and intends to recommend to the shareholders of the German company to accept the offer.

The packages consist of four television services, broadband, mobile and landline users have quickly captured in France and Spain, but highly fragmented German market is still lagging, which means that the agreement would allow Vodafone ahead of rivals as Unity Media for Liberty and Deutsche Telekom.

At a time when consumers want to watch TV and videos from a number of devices, cable assets have become more attractive because it provide internet services at speeds often five times higher than the traditional telecommunications companies services.

“The value of the infrastructure is now in the spotlight because the telcos and cable providers increasingly compete between them,” said Andreas Mark, portfolio manager at Union Investment, a shareholder of Kabel Deutschland.

The combination of Vodafone’s business and Kabel Deutschland will create a leading operator in the communications sector and, once it is completed the transaction, the British firm will have 32.4 million mobile customers, 5 million broadband and 76 million television customers in Germany. Vodafone expects to wrap up the Kabel Deutschland acquisition by the end of 2013 or early next year.

The movement has a great significance, since Vodafone seeks to reinforce its presence in a country in which it competes with groups such as Deutsche Telekom, Telefonica and KPN.

The British operator defended the fact that the purchase of Kabel Deutschland will provide significant growth potential to facilitate the launch of convergent offers fixed line, mobile, broadband and television. And it offers quadruple play is becoming one of the main trends in the telecom sector.

Various industry sources agreed that Vodafone, not having a strong position in the fixed broadband, was in a position of inferiority to the old telecommunications monopolies. In industry it is possible that the British company perform similar acquisitions in other European countries, including Spain (Cable & Wireless Worldwide bought a few months ago in the UK). Some movements that could accelerate if Vodafone finally sold its 45% stake in the U.S. company Verizon Wireless.

Overall, Vodafone defended buying Kabel Deutschland, to meet their criteria for mergers and acquisitions, including increased earnings per share and free cash flow from the first and second year after the closing of the transaction.



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