Vodafone and Liberty to combine Dutch businesses
16 February 2016
British phone network operator Vodafone Plc and cable company Liberty Global Plc yesterday agreed to merge their Dutch operations in order to create a €19 billion mobile-and-cable operator.
Under the deal, Vodafone will pay Liberty, owned by US billionaire John Malone, €1 billion ($1.12 billion) in cash to form an equal joint venture by combining Liberty's Ziggo broadband network with Vodafone's mobile operations in the Netherlands.
Both companies said that based upon the enterprise value of each business, and after deducting Ziggo's €7.3 billion of net debt, Vodafone will make a cash payment to Liberty Global of €1 billion to equalize ownership in the joint venture.
Both companies estimate total cost and revenue synergies of €3.5 billion post closing expected by the end of the year.
They also estimate integration costs to be around €350 million.
Vodafone's Netherlands unit had revenues of nearly €2 billion last year, while earnings before interest, taxes, depreciation and amortization was €643 million, while Ziggo's revenues was nearly €2.5 billion, while operating cash flow was €1.4 billion.
Liberty's Ziggo is the largest cable TV operator in the Netherlands, while Vodafone is the second-biggest mobile network operator, behind KPN.
The JV will operate under both the Vodafone and Ziggo brands and will create a nationwide integrated communications provider with over 15 million revenue generating units, of which 4.2 million are video, 3.2 million are high-speed broadband, 2.6 million are fixed-line telephony and 5.3 million are mobile.
Ziggo's Horizon TV product suite, 200 Mbps nationwide broadband internet and extensive Wi-Fi network will combine with Vodafone's, data 4G mobile.
In addition, the JV will become a leading national enterprise business through the combination of Vodafone's B2B expertise, product portfolio and strong distribution footprint together with Ziggo's B2B operations and its high-capacity nationwide cable network.
The deal comes a year after talks broke down last year on a wider swap of combining their mobile and cable networks in the UK, Germany and other European countries due to differences in valuation of their mobile and cable businesses.
Vodafone Group CEO, Vittorio Colao, said, ''Together we will be a stronger competitor in the Netherlands, benefiting customers of both companies and the market as a whole. This transaction marks a continuation of Vodafone's market-by-market convergence strategy and we look forward to partnering with Liberty Global to create a fully integrated provider in one of our core European markets.''
Mike Fries, CEO of Liberty Global, said, ''This powerful combination of the best fixed and mobile networks in the Netherlands will deliver huge benefits to Dutch consumers and businesses. 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.''
Vodafone is one of the world's largest telecommunications companies and provides a range of services including voice, messaging, data and fixed communications. It has mobile operations in 26 countries, partners with mobile networks in 57 more, and fixed broadband operations in 17 markets. As of 31 December 2015, Vodafone had 461 million mobile customers and 13 million fixed broadband customers.
Liberty Global is the largest international cable company with operations in 14 countries. Liberty Global connects people to the digital world and enables them to discover and experience its endless possibilities.
Liberty Global's products are connected to 27 million customers subscribing to 57 million television, broadband internet and telephony services. In addition, Liberty Global serves five million mobile subscribers and offers WiFi service across six million access points.
Liberty Global's businesses comprises of Liberty Global's European operations, and the LiLAC Group, which comprises Liberty Global's operations in Latin America and the Caribbean.
Liberty Global's consumer brands are Virgin Media, Ziggo, Unitymedia, Telenet, UPC, VTR and Liberty. Its operations also include Liberty Global Business Services and Liberty Global Ventures.