Vodafone Confirms Interest in Cable Giant Kabel Deutschland

Vodafone is seeking to acquire Germany’s largest cable company Kabel Deutschland

British mobile operator Vodafone has made an official approach about a possible acquisition of the largest cable company in Germany.

Vodafone confirmed on Wednesday it has made a “preliminary approach” to Kabel Deutschland Holding AG (“KD”) about a possible offer.

Backhaul Move

vodafonebiglogotopIt comes amid reports that Vodafone has been gearing up for a possible bid for Kabel Deutschland since earlier this year. However, the operator warned that a full blown offer for the cable company may not be forthcoming.

“There is no certainty that any offer will ultimately be made nor as to the terms on which any such offer might be made,” said Vodafone.

Vodafone reportedly hired Goldman Sachs to advise on its options back in February, according to Reuters, which quoted unnamed sources.

Vodafone is known to have been restructuring its European operations after declines in its key European markets. Last year, it separated its Northern and Central European business from its Southern European unit as part of a structural overhaul. And it retreated from a number of markets, including France.

But Germany remains an important market for the British operator, despite tough local market conditions, fierce competition and regulatory pressures, all of which prompted the operator to shed 500 jobs from its German business in April.

Vodafone is instead looking to ramp up its service offerings in Germany, by potentially acquiring its own backhaul capability in that market.

Quad play offerings

It did a similar thing in the UK last year after it acquired the struggling UK telecoms company Cable & Wireless Worldwide (C&WW) for £1 billion.

That move signalled Vodafone’s entry into fixed line communications for enterprise customers, but crucially it also allowed the firm to reduce its reliance on BT for its backhaul services.

Prior to that, Vodafone was forced to purchase fixed-line capacity from BT to connect its mobile masts. Yet Vodafone’s purchase of C&WW meant it has mostly eliminated its annual bill (thought to be in the region of £200m) for fixed-line backhaul services in the UK.

However, it also opens up the possibility of Vodafone expanding beyond fixed-line communications for businesses, and possibly entering the consumer market with a quad-play offering. This quad-play service would include mobile phone, home broadband, home telephone, and television, all from a single provider.

An acquisition of Kabel Deutschland would give Vodafone the necessary infrastructure and network to adopt the same tactic in Germany. It currently offers a quad play service in Portugal.

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