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TMCNet:  VODAFONE MULLS ¦ £5BN CABLE DEAL

[February 14, 2013]

VODAFONE MULLS ¦ £5BN CABLE DEAL

(City A.M. (UK) Via Acquire Media NewsEdge) VODAFONE yesterday became the latest telecoms giant to join the return to dealmaking, after the firm was linked to Germany's biggest cable operator Kabel Deutschland.

FTSE 100-listed Vodafone is believed to be discussing a bid for the firm, which had a market capitalisation of €5.6bn (£4.85bn) before the takeover talk sent its shares up almost nine per cent. Including debt, the group now has an enterprise value of €8.9bn.



Executives at Vodafone have not yet made a decision whether to bid and have not been in contact with Kabel Deutschland, but are believed to have studied the merits of a takeover several times recently.

Analysts said a deal could enable Vodafone to sell lucrative bundles of mobile, fixed-line and TV services in Europe.

The discussions surfaced a week after a string of blockbuster deals in the sector.

Virgin Media agreed a $23.3bn (£15bn) takeover by American firm Liberty Global, Dell revealed a $24.4bn buyout led by founder Michael Dell, and Comcast agreed to take the rest of NBC Universal for $16.7bn.

A bid for Kabel Deutschland would mark an acceleration in Vodafone's race down the acquisitions trail, as it looks to spend some of the billions in long-awaited dividends granted by US partner Verizon Wireless.

The firm last year paid £1.3bn for Cable & Wireless Worldwide, a purchase that included more than 20,000km of fibre cables in the UK, and snapped up New Zealand telecoms group TelstraClear for £429m. "Vodafone have said they have a convergence strategy that includes M&A and they have indicated that they are interested in fixed assets," said Espirito Santo telecoms analyst Nick Brown. "Liberty Global potentially could counterbid, but after the Virgin Media deal it may be a good time for Vodafone to pursue a bid." Chief executive Vittorio Colao said last week, after revealing a disappointing two per cent slide in quarterly revenues, that Vodafone would look to make acquisitions to prop up growth.

The firm already has around 3.4m internet customers in Germany through its ownership of Arcor, but stands apart from its European competitors in focusing on mobile operations, reducing its ability to offer package deals and offload data traffic onto its own fixed line networks.

Espirito Santo noted that a Vodafone-Kabel Deutschland tie-up could prompt scrutiny from the German antitrust watchdog.

However, analysts at Jefferies said a deal "would elicit little regulatory concern in our view, not least as it would create a more viable competitor to Deutsche Telekom".

BOTTOMLINE: Page 9, DEALS:Page 7 (c) 2013 City A.M.

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