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Vodafone, Liberty Global Form Dutch JV

Iain Morris
2/16/2016

Vodafone and Liberty Global are to merge their Dutch operations, creating a joint venture that will be a much stronger rival to incumbent KPN in the market for both fixed and mobile services.

The announcement comes shortly after the two companies revealed they were in discussions about a Dutch tie-up and several months after they first began talking about an exchange of various European assets. (See Vodafone & Liberty Go Dutch and Vodafone in Asset-Swap Talks With Liberty.)

Vodafone Group plc (NYSE: VOD) had around 5.13 million mobile subscribers and 73,000 fixed-line customers in the Netherlands in September last year, while Liberty Global Inc. (Nasdaq: LBTY)'s Ziggo B.V. operation served a total of 4.1 million pay-TV customers, with 3.1 million using its broadband service and 2.5 million using its voice offerings.

Ziggo also provided mobile services to around 181,000 customers through its mobile virtual network operator business, which is thought to use the network of Vodafone Netherlands .

According to a statement released earlier today, Vodafone made revenues of about €1.9 billion ($2.1 billion) in the Netherlands last year, and EBITDA of €643 million ($717 million). Ziggo's sales were about €2.5 billion ($2.8 billion) and its operating cash flow was nearly €1.4 billion ($1.6 billion).

The two operators say they expect to realize cost, capital expenditure and revenue synergies of about €3.5 billion ($3.9 billion) after integration costs, generating annual cost savings of about €280 million ($312 million).

The deal will see Vodafone make a payment of €1 billion to Liberty Global to "equalize ownership in the joint venture." The players say this transaction takes into account the enterprise value of each business after deducting Ziggo's €7.3 billion ($8.1 billion) of net debt.

The joint venture's net debt will be about 4.5 times its annual earnings following the deal, which is expected to close at the end of 2016 subject to regulatory approval.

Vodafone and Liberty Global said the new-look company would retain both the Vodafone and Ziggo brands and be able to offer a broadband service of 200 Mbit/s as well as nationwide 4G connectivity to Dutch consumers.


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The arrangement may stoke investor hopes of a broader deal involving Vodafone and Liberty Global following the collapse of talks last year over disagreements about valuation. (See Vodafone, Liberty Call Off Asset-Swap Talks.)

Both players have been making convergence moves to strengthen their operations. Vodafone has already acquired cable assets in several other European markets, while Liberty Global recently bought KPN Telecom NV (NYSE: KPN)'s mobile business in Belgium.

"Together we will be a stronger competitor in the Netherlands," said Vodafone CEO Vittorio Colao in a company statement. "This transaction marks a continuation of Vodafone's market-by-market convergence strategy and we look forward to partnering with Liberty Global to create a fully integrated provider in one of our core European markets."

Today's deal between Vodafone and Liberty Global comes as German incumbent Deutsche Telekom AG (NYSE: DT) looks to sell its T-Mobile Netherlands mobile subsidiary. (See Eurobites: EE Bows Out With a Whimper.)

Last week, private equity firms Warburg Pincus and Apollo were reported to have become the preferred bidders for T-Mobile Netherlands. They are expected to submit final bids of more than $3.4 billion this week.

Like Vodafone and Liberty Global, Deutsche Telekom is determined to have both fixed and mobile capabilities in the European markets where it is active.

— Iain Morris, Circle me on Google+ Follow me on TwitterVisit my LinkedIn profile, News Editor, Light Reading

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