John Malone's Liberty Global, Vodafone to Combine Dutch Units

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Liberty Global chairman John Malone

The giants have been discussing deals for a while, with Liberty Global getting a cash payment of $1.1 billion as part of the transaction.

John Malone's Liberty Global and telecom giant Vodafone have agreed to combine their Dutch units to create a bigger provider of pay TV, Internet and mobile services.

The 50-50 joint venture unveiled late Monday will probably is expected to lead to cost and revenue synergies and new services, the companies said. Vodafone will pay $1.1 billion (1 billion euros) in cash to Liberty Global as part of the deal.

The two giants have been discussing possible deals, including asset swaps, and some analysts have suggested an outright merger or takeover could also be possible.

"The joint venture realizes [Liberty Global chairman] John Malone's vision of a national integrated quad play offering," said Wunderlich Securities analyst Matthew Harrigan.

Pan-European cable giant Liberty Global’s Ziggo in the Netherlands and Vodafone's business in the country have more than 5 million mobile subscribers, 4 million video subs and 3 million broadband users. Dutch telecom giant Royal KPN has already offered such a combination of services.

"This powerful combination of the best fixed and mobile networks in the Netherlands will deliver huge benefits to Dutch consumers and businesses," said Liberty Global CEO Mike Fries. "Throughout Europe, Liberty is capitalizing on the rising demand for lightning-fast broadband speeds, the coolest digital TV platforms and apps, and seamless 4G wireless connectivity. Soon, both Ziggo and Vodafone customers in the Netherlands will be at the forefront of this new world, and we couldn't be more excited about our partnership with Vodafone. We look forward to working together to develop cutting-edge converged services for the Dutch market."

"The joint venture is expected to generate significant efficiencies, with run-rate cost and capital expenditure synergies of $313 million (€280 million) on an annual basis by the fifth full year post closing, equivalent to a net present value of approximately $2.8 billion (€2.5 billion) after integration costs," the companies said.

Liberty Global also reported fourth-quarter financials. Quarterly revenue of $4.29 billion was down from $4.32 billion in the year-ago period, but operating income rose from $273.3 million to $621.3 million amid lower impairment, restructuring and other special items.

Organic revenue-generating unit additions of 344,000 in the latest quarter meant the best quarter of the year. Video subscriber losses narrowed "materially" in the second half, leading to a full-year loss of 400,000, the company said. In the fourth quarter, the loss amounted to 33,000.

As of the end of 2015, Liberty Global provided 25.8 million unique customers with 53.6 million subscription services, including 22.8 million video and 16.8 million broadband subscriptions.