Vodafone, Liberty Discuss Netherlands Joint Venture -- Update

(Rewrites, adds detail.)

By Simon Zekaria and Razak Musah Baba

LONDON--British telecommunications giant Vodafone Group PLC (VOD.LN) Tuesday said it was in talks with U.S. peer Liberty Global PLC (LBTYA) to create a joint venture in the Netherlands, four months after talks between the firms collapsed.

In a statement, Vodafone, based in Newbury, England, said the venture would incorporate both companies' operating businesses in the Netherlands. It said discussions were ongoing and didn't extend beyond the Dutch venture, adding that there was no certainty of any agreement.

Vodafine's statement didn't provide financial details, further details on the structure of the venture or a timeline for negotiations. Liberty Global wasn't immediately available for comment.

At 1439 GMT, Vodafone shares had fallen 1.4% to 222 pence, valuing the company at 59.9 billion pounds ($86.3 billion).

Vodafone has a 39% share of core mobile revenue in the Netherlands, and at the end of last year it began legal action against competitor Royal KPN NV (KKPNY), alleging its Dutch rival delayed the introduction of Vodafone's competing suite of television, fixed-line broadband and fixed-line telephone services in the Netherlands by three years. Liberty, which is based in the U.S. but focused on Europe, acquired KPN's Dutch cable rival Ziggo for nearly $10 billion in 2014.

Last September Vodafone terminated talks with Liberty regarding a possible exchange of selected assets between the two companies, without disclosing the types of assets under consideration or geographic locality. Vodafone had confirmed early-stage talks in June 2015, but ruled out any discussions over a full-blown merger.

In May 2015, Liberty Global Chairman John Malone signalled his company's interest in a deal with Vodafone, saying the U.K. telecoms firm, which is the largest global mobile operator after China Mobile Ltd., would be a "great fit" with his cable operator, which is the largest in Europe by number of subscribers.

Liberty, with headquarters in both Englewood, Colo., and London, operates in some of Europe's biggest markets, including Germany, the Netherlands and the U.K., where it owns Virgin Media Inc. Liberty has been on the acquisition hunt in recent years to snap up cable operators in Europe, where it has the majority of its broadband networks.

Vodafone, meanwhile, has also been looking at European acquisitions. Indeed it has purchased fixed-line assets in Germany and Spain to shore up its flagging mobile business in Europe and bolster its position as a unified media player in a rapidly-evolving market of bundled services.

Like Liberty, Vodafone derives the majority of its profit and sales from the continent, with a focus on Germany, Italy and Spain.

The talks between Liberty and Vodafone are part of a recent frenzy of European television and communications deal-making in recent years, with telecom and cable operators eager to benefit from the so-called "quadruple-play" -offering services that encompass fixed telephony, mobile, Internet broadband and pay-television. The packaged offerings are aimed at boosting subscriber revenue and winning consumer loyalty.

Over-the-top streaming platforms such as Netflix Inc. have also started to eat into their potential market, adding pressure to bulk up. The continent's telecom players have suffered in recent years from fragmented markets across Europe and slow growth, which hasn't picked up much since the depths of the global economic crisis and Europe's painful recession.

Write to Simon Zekaria at [e-mail] and Razak Musah Baba at [e-mail]

(END) Dow Jones Newswires

February 02, 2016 10:44 ET (15:44 GMT)

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