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European wireless giant Vodafone Group has won conditional European Union approval for its takeover of Liberty Global’s cable assets in Eastern Europe and Germany.
Vodafone cited a deal value of €18.4 billion ($20.7 billion), while Liberty Global focused on the deal’s enterprise value of approximately €19.0 billion ($21.5 billion) on a U.S. accounting basis.
The two companies in May unveiled the agreement that will see Liberty Global sell its businesses in Germany, Hungary, the Czech Republic and Romania to Vodafone, which is the world’s second-largest wireless company in terms of subscribers.
Vodafone on Thursday said that it will become “Europe’s leading converged operator, with 116.3 million mobile customers, 24.2 million broadband customers and 22.1 million TV customers across 13 European countries.”
The European Commission, the antitrust enforcer of the European bloc, in December announced a full-scale probe of the deal and its impact. EU regulators warned about its possible anti-competitive effects and outlining their concerns, especially in Germany and the Czech Republic. Vodafone then made concessions and now has won conditional approval.
“With the European Commission’s approval of this transaction, Vodafone transforms into Europe’s largest fully-converged communications operator, accelerating innovation through our gigabit networks and bringing greater benefits to millions of customers in Germany, the Czech Republic, Hungary and Romania,” said Vodafone CEO Nick Read. “This is a significant step toward enabling truly digital societies for our customers.”
The transaction is expected to be completed by July 31 and generate cost and capital expenditure synergies worth more than €6 billion ($6.7 billion) after integration costs, in addition to revenue synergies exceeding €1.5 billion ($1.7 billion) “from cross selling to the combined customer base, Vodafone said. “Together with the standalone growth potential of the acquired assets, these synergies support double-digit free cash flow per share accretion (before integration costs) from the third year post-completion for Vodafone.”
Liberty Global CEO Mike Fries said the deal would be “good news for our employees in each market who will become part of a fixed-mobile national challenger with the strength and scale to take on national telco incumbents.”
After completion of the transaction, Liberty Global will “continue to be one of the world’s leading converged video, broadband and communications companies, with consolidated operations in the United Kingdom, Ireland, Belgium, Switzerland, Poland and Slovakia,” Fries added. “Together, these country operations reach 25 million homes, account for 25 million video, broadband and fixed-line telephony subscribers and six million mobile services. In addition to a significant cash balance as a result of the proceeds, Liberty Global also owns 50 percent of VodafoneZiggo, a joint venture in the Netherlands with 4 million customers subscribing to 10 million fixed-line and 5 million mobile services.”
EU competition commissioner Margrethe Vestager said about the conditions offered by Vodafone as part of the deal: “In our modern society, access to affordable and good quality broadband and TV services is almost as asked for as running water. We have today approved Vodafone’s purchase of Liberty Global’s business in Czechia, Germany, Hungary and Romania subject to remedies designed to ensure that customers will continue enjoying fair prices, high-quality services and innovative products.”
EU regulators said Vodafone offered the following commitments:
– To provide a remedy taker, namely Spanish telecom giant Telefonica, “with access to the merged entity’s cable network in Germany.” This commitment would enable Telefonica “to replicate the competitive constraint exerted by Vodafone, which would be lost as a result of the merger, and to compete more effectively in the provision of fixed broadband services in Germany. In addition, the remedy would allow the remedy taker to offer TV services.”
– “To refrain from contractually restricting, directly or indirectly, the possibility for broadcasters that are carried on the merged entity’s TV platform to also distribute their content via an OTT service. This commitment is designed to counterbalance “the increased market power of the merged entity vis-a-vis TV broadcasters and eliminates the concern that the merged entity could hinder the broadcasters’ ability to provide additional, innovative services through OTT services.”
– Not to increase the feed-in fees paid by free-to-air broadcasters for the transmission of their linear TV channels via Vodafone’s cable network in Germany by extending the existing agreements or, where needed, by reaching new agreements. “This commitment addresses the concern related to the merged entity’s ability to reduce the breadth and the quality of the free-to-air TV offer to retail customers,” the EU said.
– To continue to carry the HbbTV signal of free-to-air broadcasters, which allows TV customers to be directly connected to the broadcasters’ interactive services. “This commitment eliminates the concern that the merged entity could hinder the broadcasters’ ability to provide additional and innovative services through HbbTV signal,” the EU said.
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