Vodafone pays to quad-play with Kabel Deutschland

Vodafone pays to quad-play with Kabel Deutschland
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Vodafone has agreed to buy Germany’s biggest cable operator Kabel Deutschland for 7.7 billion euros.

It is the UK-based firm’s second such major acquisition in Europe in 12 months. Previously it purchased Cable & Wireless Worldwide.

Vodafone, which is the world’s second-largest mobile operator, is keen to offer more competitive packages with TV, fixed-line telephone and broadband internet to its mobile phone customers – so-called Quad-play services.

It is however paying a rich price for Kabel Deutschland, which supplies 8.5 million German homes, having been forced to raise its offer last week after Liberty Global of the US tried to muscle in.

The 87 euro per share deal is a near 40 percent premium to Kabel’s price before Vodafone’s interest first emerged

“German consumer and business demand for fast broadband and data services continues to grow substantially, as customers increasingly access TV, fixed and mobile broadband services from multiple devices,” Vodafone Chief Executive Vittorio Colao said.

“The combination of Vodafone Germany and Kabel Deutschland will greatly enhance our offerings in response to those needs.”

The board of Kabel Deutschland said it expected to recommend the offer to its shareholders, although some analysts thought Liberty Global could still return with a counter offer even though it would likely face high regulatory barriers.

The combination of Vodafone and Kabel Deutschland will result in a group with 11.5 billion euros of revenue in Germany, from 32.4 million mobile customers, 5 million broadband and 7.6 million TV customers.

Quad-play services have caught on rapidly in markets like France and Spain, where they have been pioneered by major local companies France Telecom and Telefonica.

Germany is still some way behind and buying Kabel Deutschland could allow Vodafone to steal a march on Deutsche Telekom, the traditional fixed-line group.

Cable operators across Europe including Liberty Global, Dutch group Ziggo, Kabel Deutschland and Britain’s Virgin Media have been winning customers and investors with their offers of a combined package of TV, broadband and telephony services.

Liberty Global has been the most active acquirer in Europe in the last few months, buying Virgin Media and increasing its stake in Ziggo, stretching its balance sheet and perhaps hampering its options in Germany.

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