Vodafone And Virgin Media Owner In Talks About ‘Asset Exchange’ But Not Merger

Vodafone has confirmed it is in talks with Liberty Global over a “possible exchange of assets”, intensifying speculation that the operator might look to acquire Virgin Media to better compete with in an increasingly converged UK communications market.

Liberty Global operates cable services in a number of European countries while Vodafone has networks around the world. However at this stage it is unclear which particular assets are ripe for an exchange

“Vodafone confirms that it is in the early stages of discussions with Liberty Global regarding a possible exchange of selected assets between the two companies,” said a company spokesperson. “There is no certainty that any transaction will be agreed, nor is there certainty with respect to which assets will ultimately be involved. Vodafone is not in discussions with Liberty Global concerning a combination of the two companies.”

Expansion

Vodafone has been linked with a takeover of Liberty Global for some time, but the Newbury-based firm has ruled out a merger, increasing the likelihood that it plans to cherry pick individual assets – such as Liberty’s UK operations.

The acquisition of Virgin Media, which Liberty Global purchased for £15 billion in 2013, would give Vodafone access to a vast cable network and would strengthen its plan to offer quad-play packages of broadband, mobile, landline and television packages.

Vodafone has already announced plans to offer home broadband services to customers from next year, partly powered by the Cable & Wireless network it bought in 2012, which supplies services to enterprises. However it might feel it needs to more to compete with BT, which is in the process of buying EE, Sky and TalkTalk, as well as a merged Three-O2.

“Vodafone has lagged behind its peers in the recent flurry of mergers and acquisitions and has been at risk of being muscled out of the mobile market by giants such as BT/EE and Three/O2, as well as new entrants like Talk Talk and Sky,” said Imran Choudhary, consumer insight director at Kantar Worldpanel. “Access to Liberty’s UK broadband infrastructure, which currently serves one fifth of the country via Virgin Media, would allow Vodafone to offer its customers internet packages alongside the cloud-based TV service it plans to launch at the end of 2015.  By agreeing to asset swaps, Vodafone has identified a way to keep up with the competition without embarking on a full-blown merger.

Virgin Media has almost five million broadband customers and is currently embarking on a £3 billion network expansion named ‘Project Lightning’. For reporting purposes, Liberty combines figures for the UK and Ireland and claims its networks reach 13,512,900 premises in both countries. At last count, Virgin Media alone reached 12.6 million homes and businesses, a footprint that Project Lightning hoped to increase to 17 million.

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