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Analyst Sees 'Increased' Chance of Vodafone-Liberty Global Deal

John Malone
Matthew Staver/Bloomberg via Getty Images

John Malone's international cable company has been on an acquisition spree, while investors have wondered what the U.K. telecom giant will do with its cash.

LONDON – U.K. telecom giant Vodafone plans to sell its 45 percent stake in Verizon Wireless, meaning that "the probability of a Vodafone-Liberty Global tie-up has somewhat increased near term," Macquarie Securities analyst Amy Yong said in a report published Friday.

Vodafone is selling its stake in Verizon Wireless to Verizon Communications for up to $130 billion.

With the report already circulating among clients late Thursday, Liberty Global's stock rose 3.2 percent late Thurday as some investors took the report to mean Vodafone could indeed look for an outright acquisition.

"Vodafone is clearly interested in cable assets as seen by its recent bid for German operator Kabel Deutschland for $10.1 billion," outbidding Liberty Global, Yong wrote. "Given the need for scale and scarcity of European cable assets, there are likely significant synergies in a Vodafone-Liberty Global combination."
    
But the analyst also suggested that the two companies could simply launch a wireless services partnership "to leverage each other's infrastructure and exploit the demand for convergent services in certain European markets, including the U.K., Netherlands and Germany." She added: "Penetrating the wireless market is a longer-term objective for Liberty, as it is currently launching mobile services via MVNO agreements across Europe. However, there may be some overlap: Vodafone has already acquired Cable & Wireless Worldwide in the U.K. and has made a bid for Kabel Deutschland in Germany."

Liberty Global, especially at recently acquired U.K. cable giant Virgin Media, also has "sizable tax assets that could be appealing to Vodafone," Yong said. "We think M&A will be an important driver in unlocking these tax assets."

But she concluded: "A near-term deal is unlikely as…the Verizon-Vodafone transaction is unlikely to close before mid-2014, Vodafone would need clarity on Germany's stance on consolidation, and the company needs to finalize its acquisition of Kabel Deutschland."

E-mail: Georg.Szalai@THR.com
Twitter: @georgszalai