Brussels clears Vodafone’s €19bn Liberty Global deal

Vodafone has won approval from Brussels for its €19bn purchase of Liberty Global assets in Europe, opening the door for further consolidation in the region’s telecoms industry.

The European Commission cleared the takeover of Liberty’s German and eastern European cable networks on Thursday after Vodafone offered concessions to ease competition concerns.

Europe’s largest telecoms deal in more than a decade, known by the companies as Project Scorpio, cements Vodafone’s status as Europe’s largest mobile and broadband player. It also strengthens the UK company’s hand as the natural challenger to local incumbents across the region, including BT, Deutsche Telekom and Telefónica.

“This is a significant step towards enabling truly digital societies for our customers,” said Nick Read, Vodafone’s chief executive.

Vodafone this year cut its dividend for the first time in its history and is under pressure to justify the blockbuster deal. The stock, which ticked up 1 per cent following the deal’s approval, has lost almost 50 per cent since the start of 2018.

The clearance is subject to conditions including Vodafone’s offer to allow rival Telefónica Deutschland wholesale access to its cable network in the country.

Liberty, which owns the Virgin Media cable company in the UK and is controlled by US billionaire John Malone, has been one of the most acquisitive companies in European telecoms over the past decade but has recently retrenched, selling its Austrian business, merging with Vodafone in the Netherlands and agreeing to sell its Swiss cable business to rival Sunrise.

The company now has a war chest of about €10.6bn, having sold its German cable business Unitymedia to Vodafone for 12 times the unit’s operating cash flow. Liberty has been linked with a number of assets including mobile networks O2 and Three in the UK.

The approval of the Vodafone-Liberty deal raises hopes of stimulating a wave of telecoms consolidation, which largely ground to a halt in 2016 when European competition commissioner Margarethe Vestager blocked CK Hutchison’s attempt to buy Telefonica’s O2 network in the UK on competition grounds.

Smaller deals, including Deutsche Telekom’s takeover of Tele2 in the Netherlands, Hutchison’s purchase of Amsterdam-based Veon’s stake in Wind Tre in Italy, and Telenor’s acquisition of DNA in Finland, have taken place but the Vodafone-Liberty deal was considered a test case for further activity.

“In our modern society, access to affordable and good quality broadband and TV services is almost as asked for as running water,” Ms Vestager said on Thursday. “We have today approved Vodafone’s purchase of Liberty’s business in [the Czech Republic], Germany, Hungary and Romania subject to remedies designed to ensure that customers will continue enjoying fair prices, high-quality services and innovative products.”