Liberty Global Preparing Bid for Largest German Cable Operator (Report)

John Malone
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John Malone's international cable group has recently been on a European buying spree, snatching up Britain's Virgin Media and a stake in Dutch cable operator Ziggo.

COLOGNE -- Is John Malone considering a takeover bid for Kabel Deutschland, Germany's largest cable operator? An "exclusive" report in Germany's Manager Magazin says Malone's Liberty Global is preparing a bid for the German cable giant to preempt a potential takeover offer from British mobile phone carrier Vodafone.

The German cable market, the largest in Europe, is still posting strong growth, in large part due to the roll-out of so-called triple play offerings, whereby customers pay cable providers for broadband Internet and telephone services in addition to cable TV. The size, and health, of the German cable market led to the speculation that Vodafone was eyeing a bid for Kabel Deutschland.

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According to the report, Liberty is looking to add Kabel Deutschland, and its 8.5 million customers, to its global cable empire. Malone's company, the world's largest cable group, completed its merger of Germany's second and third largest cable operators, Unitymedia and KBW, in late 2011. At the time, Liberty was forced to make significant concessions to receive regulatory approval for the deal.

Malone has been on a European buying spree of late, snatching up Brit cable operator Virgin Media for $23.3 billion earlier this year. He recently put up an additional $810 million for a minority stake in Ziggo, the largest cable operator in the Netherlands and upped Liberty's majority stake in Belgian cable group Telenet.

Polo Tang, an analyst at UBS, wrote that the while reports of a take-over bid "is seen as positive for sentiment for Kabel Deutschland, we believe any offer from Liberty Global could face significant competition issues from the (German) Federal Cartel Office."

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Tang points out that for Liberty's merger of Unitymedia and Kabel BW, German authorities chose to view cable TV as a single market, and not as part of a broader triple play business where Liberty competes with broadband and mobile phone groups such as Deutsche Telekom and Vodafone. "On this definition, cable re-unification (in Germany) is unlike in the near term (2-3 years)," Tang wrote. He added a full takeover of Kabel Deutschland, which would give Malone a dominant position in the German cable business, could complicate Liberty's bid for Virgin Media, a deal that still has to be approved by European competition authorities.

While Liberty Global declined to comment on "market rumors," Manager Magazin quotes a Liberty Global spokeswoman as saying that "consolidation is necessary in the fragmented German cable market".