(Bloomberg) -- Vodafone Group Plc and John Malone-controlled Liberty Global Plc have finally made it down the aisle. It may not be the blowout nuptials that many hoped for, or at least not yet (the U.K. remains absent from the feast.) But mobile phone giant Vodafone is buying German and east European cable businesses representing almost a quarter of Liberty's revenue.
As long as fierce local opposition from companies such as Deutsche Telekom AG doesn’t scupper its plans, Liberty will walk away with 10.8 billion euros ($12.7 billion) in cash. Vodafone will take on 7.6 billion euros in debt from the German unit it's acquiring, UnityMedia.
So the question is how far this represents a withdrawal from Europe for billionaire Malone, known in the U.S. as the cable cowboy after decades of debt-fueled dealmaking. He had spoken famously a few years back about Vodafone being a “banana in a jar” that he’d like to find a way to extract. But it appears that Vodafone’s CEO Vittorio Colao is the one picking the fruit now. The British company is interested too in buying out Liberty from the two companies’ 50-50 Dutch venture. A U.K. deal could be possible in the next few years.
Liberty’s CEO Mike Fries said the proceeds from Wednesday’s deal would "provide significant additional flexibility to optimize growth and shareholder returns." Investors can no doubt look forward to more buybacks. Liberty announced a $2 billion share repurchase program in December to be completed this year. With the Vodafone deal set to be wrapped up in mid-2019, an extension of those repurchases seems likely.
That’s not to say there aren’t other deal opportunities, it’s just that they appear to be on the smaller side – unless there’s a surprise in store at Liberty’s British cable provider Virgin Media. This could also be the chance to move further in the direction of making content by investing more in ITV Plc, a British broadcaster, or Lionsgate Entertainment Corporation, a film and TV studio owner.
On the more traditional telecoms end of the business, RBC Capital Markets analyst Jonathan Dann has highlighted the potential for deals in Belgium, Switzerland and Poland.
Poland seems the most appealing. Liberty already owns a controlling stake in Belgium's Telenet, and it might cost as much as 5.1 billion euros to buy the rest based on the operating free cash flow multiple of Wednesday's deal, according to Bloomberg Intelligence's Erhan Gurses. That's a lot for a slow-growing business.
In Switzerland, it looks like efforts to tie up with mobile operator Sunrise Communications Group AG are focused on a joint venture, according to a March scoop from Bloomberg News. The Swiss carrier’s CEO said subsequently there were no active talks.
Poland’s Play Communications SA might be more attractive. The country is Liberty's sixth-biggest market, with yearly revenue of $418 million from its local UPC unit. Play has a $2.1 billion market value and has averaged 16 percent revenue growth over the past five years. A combination with UPC would let it offer more services.
Still, the content prospects look more intriguing. Lionsgate’s vice-chairman Michael Burns is very interested in media consolidation, and Malone and Liberty Global between them already hold an 11 percent interest. Malone has advocated mergers between U.S. content makers, and strengthening his position at Lionsgate would make it easier to push a deal through. As my Opinion colleague Tara Lachapelle has pointed out, Malone’s substantial investments in Discovery Communications Inc. show how serious he is about content.
So while buybacks and minor European deals are on the table, don’t be surprised if we see more of Malone the TV and movie mogul.
A previous version of this story was updated to remove a mistaken attribution.
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