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February 16, 2016updated 12 Jul 2017 9:14am

Will Vodafone and Liberty Global mergers extend to the UK?

News: As Vodafone and Liberty Global merge their Dutch assets, CBR examines the implications for their businesses in the UK.

By Alexander Sword

How far across Europe will the new partnership between Liberty Global and Vodafone extend? As the two international telcos announce a merger in the Netherlands, it remains an open question whether they will take the same approach elsewhere.

The deal is a 50-50 joint venture to create a national unified communications provider across video, broadband, mobile and B2B. Ziggo’s broadband network will be combined with Vodafone’s mobile network in the transaction, which is expected to close around the end of 2016.

Paolo Pescatore of CCS Insight says that the deal “definitely makes sense in the Netherlands” and that the companies were certainly “evaluating options for other markets”.

“Vodafone has not made significant headway in the consumer fixed line market and Liberty Global is keen to add mobile services,” he said. “One clear benefit of the JV is the ability to introduce services much more quickly, but clear decisions need to be made on brand and retail.”

However, there is no reason to think that this approach is exportable to the rest of Europe.

Vodafone is pursuing a strategy across Europe of acquiring and building fixed line assets in the hope of being able to offer customers bundles.

A full merger between Vodafone and Liberty Global would be problematic, however, since both companies would acquire assets that they don’t want. For example, Liberty Global is still active in Poland while Vodafone has pulled out.

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As for the UK, the situation is different again. Vodafone, as of March 2015, had a 24 percent share in the mobile market according to Statista and has been expanding its share in the fixed market. It launched its long-awaited home phone and broadband services in October.

Liberty Global owns the Virgin Media brand, which provides a range of services to both consumers and businesses.

CCS Insight claims that for Vodafone in the UK, a tie-up with Sky would make more sense.

“In the UK we still believe that strategically it makes more sense for Vodafone to acquire Sky driven by the importance of content,” says Paolo Pescatore. As the market rapidly moves towards multiplay, it will be important for providers to differentiate beyond price alone.”

Such a move could be advantageous for Sky in the light of BTs acquisition of EE, which is combining the largest fixed line and broadband provider with the largest mobile provider. Sky leads in the Pay-TV market but has yet to launch its mobile services, which are expected this year as part of an MVNO deal with Telefonica.

Liberty Global, meanwhile, is pursuing this content market with its own acquisitions.

“Liberty continues in buying stakes in content assets related to creation and production,” says Pescatore. “It is slowly gaining access to original content which could prove to be a strategic weapon over rivals. This is in stark contrast to many European telecom providers who are securing licensing rights to premium content.”

This includes purchasing and raising a stake in ITV, acquiring UK production firm All3Media with Discovery Communications and Irish broadcaster TV3.

It is unclear, then, what is next for the two telcos; presumably, the Netherlands will provide something of a trial ground for future joint activities.

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