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Vodafone Wins Conditional EU Approval for Liberty Global Bid

Vodafone Wins Conditional EU Approval for Liberty Global Deal

(Bloomberg) -- Vodafone Group Plc won conditional European Union approval for its 18.4 billion euro ($20.7 billion) takeover of Liberty Global Plc’s cable assets in Germany and eastern Europe.

The company assuaged EU concerns by offering to give smaller rival Telefonica SA access to its entire German cable network and providing assurances to German broadcasters worried about its power, the European Commission said in an emailed statement on Thursday. Telefonica will be able to “compete more effectively” for broadband internet in the country, the commission said.

The deal sees Vodafone scoop up almost a third of Liberty Global and helps it bundle internet, phone and TV services in Germany, its biggest market, in a challenge to former monopoly Deutsche Telekom AG. It will hand Liberty Global’s dealmaking management team almost 11 billion euros in cash, leading to speculation that billionaire John Malone’s European cable company could buy a mobile operator or broadcaster in addition to promised share buybacks.

Vodafone shares were up 1.2% as of 2:11 p.m. in London.

Regulators said last year they were concerned that merging Vodafone with Liberty’s Unitymedia cable internet business would reduce the number of providers and eliminate competition. Approval is a victory for Vodafone after Deutsche Telekom AG’s Chief Executive Officer Tim Hoettges vowed last year to try to block the deal, which he said would create a monopoly for part of the TV market and possibly harm media plurality.

What Bloomberg Intelligence Says

The European Commission’s approval of Vodafone’s Liberty Global deal with limited remedies is positive, involving network access for Telefonica and light antitrust measures for broadcasters, which don’t undermine projected synergies worth a net present value of 6 billion euros, or 16% of Vodafone’s market cap.
--Erhan Gurses, BI telecom analyst
Click here to view the research

Deutsche Telekom criticized the approval and said it would consider a legal challenge.

"Nearly the entire industry" told the EU that the transaction would complicate the roll-out of optical fiber in Germany, according to a statement on its website. The deal could create cable monopolies in some areas, closing off an important market to the company, it said, predicting a potential "negative impact" on media and TV program choice.

To appease broadcasters, Vodafone promised to avoid contracts that might prevent them using internet platforms to distribute their content. It also promised to freeze feed-in-fees it pays to free-to-air broadcasters to show their channels and will continue to carry their HbbTV signal, which allows TV customers to access interactive services.

Vodafone said it expects to complete the deal by July 31. It anticipates the deal to bring cost and capital expenditure savings of more than 6 billion euros and net present value revenue synergies of more than 1.5 billion euros from cross-selling to its combined customer base.

"Double-digit free cash flow per share accretion before integration costs" should come from the third year after completion, it said in an emailed statement.

Liberty Global Chief Executive Officer Mike Fries said in a statement that the deal will bring considerable benefits to consumers. The company noted its “significant cash balance” from the transaction proceeds.

Regulators saw no concerns with Vodafone’s acquisition of Czech, Hungarian or Romanian assets. It didn’t take any issue with German retail TV or see any chance the deal would reduce investment in next-generation networks in the country.

--With assistance from Thomas Seal.

To contact the reporter on this story: Aoife White in Brussels at awhite62@bloomberg.net

To contact the editors responsible for this story: Anthony Aarons at aaarons@bloomberg.net, Christopher Elser, Peter Chapman

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