Speaking in Davos, Liberty Global (LBTYA -0.8%) CEO Mike Fries says the company's joint deal with Vodafone (VOD -1%) in the Netherlands isn't a blueprint for deals in other nations that the two share a presence.
The deal's going well ("It's only been three weeks, but I will tell you we're encouraged") and hasn't quieted analyst and investor talk about a broader tie-up (a possibility that was rejected when the two passed up an asset swap in 2015), but Fries says "I don't see us doing those types of structural transactions in other markets."
Fries says Liberty does believe in "fixed/mobile convergence" and that it expects to be one of the two players remaining in each of its European markets when the dust settles.
With the new year, Liberty Global (LBTYA +1.1%) and Vodafone (VOD +1.7%) have completed the joint venture they planned to create in the Netherlands, establishing a new converged communications firm.
The venture -- to be called VodafoneZiggo Group -- combines Liberty's Ziggo fiber-rich broadband with Vodafone's top mobile operation into a firm with combined revenue of more than €4B. The venture will sell services under both the Vodafone and Ziggo brands.
After closing and following recapitalization, Liberty Global will receive €2.2B and Vodafone €0.6B in cash.
Once Vodafone's divestment of its fixed business Vodafone Thuis is accounted for, net present value of synergies for the deal is estimated around €3.5B. Vodafone Thuis had been generating negative cash flow (-€73M in the 12 months ended September 2016).
Despite that, many analysts say the reasoning behind getting the two together is still there. And Colao says incumbent telecoms are still powerful.
"They see that in each country there is a KPN, a Telecom Italia, a Deutsche Telekom, a BT, that are at the end of the day still incredibly, I would not want to use the word dominant, but let's say influential. And you want a counter force, and we could be that counter force," he said.
The two have pressed to combine their Wind Telecomunicazioni and Three Italia into Italy's largest wireless carrier via an $8.9B transaction, but have been pursuing that deal against the backdrop of a European Commission taking a hard line on competition. The EC blocked Hutchison's attempt to merge its Three UK with O2.
But a revised plan from the two hopefuls included sales of spectrum, sites and services, and allowing France's Iliad (OTCPK:ILIAY) to enter the Italian market as a new competitor.
Approval would affect the stock of current market leader Telecom Italia (TI +1.1%), which tumbled last month when VimpelCom and Hutchison submitted new merger plans, and of Vodafone (VOD -0.6%).
Idea, the third-largest telecom in India, has blasted the report as "baseless and absolutely false" and "preposterous." Vodafone India is the second-biggest provider; the two combined would outsize No. 1 Bharti Airtel.
Sources told CNBC-TV18 that the two companies were engaged in discussing strategic options that could result in a full combination. That would preclude Vodafone India's moves toward an initial public offering.
Such a deal would run into challenges, including clearance from the Competition Commission, considering that market share would rise about 50% in some areas.
The European Commission has approved a merger in the Netherlands of Liberty Global's (LBTYA +1.6%) cable firm Ziggo with Vodafone Netherlands (VOD +0.4%), on the condition that Vodafone sell its fixed business.
Liberty Global has jumped from an open in the red to positive ground this morning.
That makes a strong competitor to incumbent provider Royal KPN (OTCPK:KKPNY). Ziggo is the Netherlands' top cable provider, and Vodafone is the second-largest mobile operator.
The two companies had reportedly offered concessions last month to get the deal done, and it appears the EC's main concern was Vodafone's quick expansion in the fixed-line market.
In keeping with other such regulatory reviews, the EC denied a request from the Dutch competition regulator to probe the deal but said it consulted with the agency in its review.
Italian utility giant Enel (OTCPK:ENLAY) is going to push incumbent Telecom Italia (TI -0.3%) in a quest for a new high-speed network for the country, with an agreement to merge its fiber unit with Metroweb Italia.
Telecom Italia had been pursuing its own deal for Metroweb in the spring. Italy's average landline Internet speeds are among the lowest in Europe.
Metroweb was assigned an enterprise value of €814M (about $903M), and stakes in the combined company will be shared by Enel and state lender Cassa Depositi e Prestiti, which controls Metroweb along with infrastructure fund F2i.
Repurposing Enel's power cabinets to create fiber infrastructure will give TI competitors like Vodafone (NASDAQ:VOD) an easier way to provide access to customers who are demanding faster Internet.
The European Commission -- lately prone to blocking telecom consolidation on the continent -- is ready to sign off on a €21.8B combination of Three Italia, owned by Hutchison (OTCPK:HUWHY), with Wind Telecomunicazioni, owned by VimpelCom (VIP +1.7%).
Hutchison saw a similar deal blocked by the EC, to merge its Three UK unit with Telefonica's O2.
The move would make the combo the biggest wireless provider in Italy, competing against Vodafone (VOD +1.3%) and Telecom Italia (TI +2.3%), though Hutchison and VimpelCom agreed to concessions and asset sales to help create a new entrant in France's low-cost provider Iliad (OTCPK:ILIAY -4.2%).
The EC is scheduled to officially rule on the case by Sept. 8.
As the world's biggest telecoms continue to pivot toward TV and online video, Britain's Vodafone (NASDAQ:VOD) has agreed to a combine its New Zealand operations through a $2.4B merger with the local unit of Sky Network (OTC:SKKTY).
"This is a significant and positive step in Sky's evolution," CEO John Fellet said in a statement.
Vodafone NZ has 2.35M mobile connections and more than 500K fixed-line connections in the country. Sky has over 830K subscribers.
The French media giant's stance on TIM was a clear catalyst for the March departure of Marco Patuano as TI's chief executive, as Patuano was inclined to hold on to the business.
A series of machinations over the past year took place around the possible merger of TIM with debt-laden carrier Oi (OIBR -3.5%) before the prospects of a deal imploded.
An M&A lawyer said that when Vivendi inherited its Telecom Italia stake in 2014 (via its sale of broadband company GVT to Telefonica), it was already expressing an interest in getting out of Brazil and taking charge of TI as a media platform.
Rivals Telefonica Brasil (VIV -0.2%) and Claro (AMX +1.5%) aren't likely candidates to take over TIM due to regulatory issues. Oi is surely a candidate again, but more desperate for a move than TIM. Brazil might go for a bid from someone like Vodafone (VOD -0.8%), though.
The company will meet with the European Commission on March 7, along with rivals Sky (OTCQX:SKYAY +2.4%), Virgin Media (LBTYA +2.8%), TalkTalk (OTC:TKTCY), Vodafone (VOD +3.1%) and BT Group (BT +3.4%). Iliad (OTCPK:ILIAY +2.5%), the small provider owned by French billionaire Xavier Niel, could also take part.
The long-in-the-works deal has generated plenty of heat, as the combination of Hutchison's Three UK (the country's No. 4 wireless provider) with Telefonica's O2 (the No. 2 provider) would create the country's largest, reducing the market to three major competitors.
When the EC opened a full probe into the deal in October, the move suggested that heavy concessions were likely on the way to make the deal happen -- and they may include creating a smaller competitor. (TalkTalk has said it would love to help.)
The UK tried to take over the probe, but the EC rejected that request and kept control of the deal investigation in early December.
Liberty Global (NASDAQ:LBTYA) and Vodafone (NASDAQ:VOD) are merging Dutch operations in a joint venture, in a bit of an appetizer before what could be a broader combination of operations in the future.
It's a big appetizer, though -- the 50/50 venture is valued at more than €19B -- and the companies said discussions around the Netherlands venture haven't ranged into any other areas.
The venture will sell mobile and cable under both companies' brands (Ziggo and Vodafone), and Vodafone will pay €1B as part of the deal to equalize their ownership.
It will have more than 15M revenue-generating units, and the companies expect after the deal closes later this year that they'll see cost and revenue synergies of €3.5B (and €350M in integration costs).