Adding another wrinkle to the proposed sale of certain Liberty Global cable systems in Europe to Vodafone, European Union regulators are close to issuing a warning about the potential anti-competitive effects from the deal, Reuters reported.
Reuters said the warning from regulators is expected soon, ahead of a June 3 deadline for the EU's executive regulatory approval, and that it's anticipated that Vodafone will offer concessions to address the EU's concerns. It's not clear what concessions Vodafone will serve up.
Neither side has commented on the report, but a person familiar with the proposed agreement said that such a warning would be a natural and expected phase of the merger. Speaking on the company's Q4 call last month, Liberty Global CEO Mike Fries expressed optimism that the Vodafone deal will get done. "We feel positive about both approval and timing there," he said.
The €18.4 billion (US$20.93 billion) transaction, announced in May 2018, has long been under the regulatory microscope. In December, the European Commission opened an "in-depth investigation" to assess the potential competitive implications posed by the proposed sale of Liberty Global assets in Germany, the Czech Republic, Hungary and Romania to Vodafone. That "Phase II" probe followed concerns raised by Deutsche Telekom that the takeover could reduce competition in Germany and the Czech Republic, and boost Vodafone's bargaining power with TV broadcasters. (See European Commission Digs Into Vodafone-Liberty Global Deal and Vodafone Strikes €18.4B Deal to Buy Liberty Assets.)
Despite the regulatory static, the move between both companies still makes strategic sense, Paolo Pescatore, tech, media and telco analyst at PP Foresight, said in an emailed statement to Light Reading.
"Ultimately concessions will be made but it is not a slam dunk as both parties made it out to be at the outset," Pescatore explained. "Bottom line, the number of national players are being reduced. Furthermore there will be fewer competitors in fixed line broadband and pay-TV services. This can't be good for the market and consumers."
Denver-based Liberty Global is also getting some pushback on the proposed sale of its UPC Switzerland operations to Sunrise for $6.5 billion. Freenet, which has nearly a 25% stake in Sunrise, has threatened to argue against the deal, arguing that too much risk is put on existing Sunrise investors. Liberty Global noted that Freenet doesn't have total blocking power, as Liberty Global can get the deal done with 51% approval. (See Liberty Global Faces Hurdles in Swiss Sale.)
The transactions with Sunrise and Vodafone play into Liberty Global's strategy to focus on regions of Europe where it has the most scale. With its position in Switzerland now on the sales block, that puts Liberty Global's future emphasis on the UK, Belgium and Holland. (See European Cable Has Reached 'Inflection Point,' Liberty Global CEO Says.)
— Jeff Baumgartner, Senior Editor, Light Reading