Vodafone confirms Liberty Global talks

Vodafone has confirmed that it is in early stage discussions with Liberty Global about a “possible exchange of selected assets”, but not a full merger.

“There is no certainty that any transaction will be agreed, nor is there certainty with respect to which assets will ultimately be involved,” said Vodafone in a statement today.

“Vodafone is not in discussions with Liberty Global concerning a combination of the two companies.”

The news follows recent press speculation about a tie-up between the two firms – including a Bloomberg report yesterday that said Vodafone and Liberty are discussing a range of possible transactions, including an outright merger.

Speaking to the business news wire last month, Liberty chairman John Malone said that an agreement to work together with Vodafone, or a combination of the two companies, could deliver “very substantial synergies” and cited the benefits of a merger in markets including Germany, the UK and the Netherlands.

However he highlighted significant differences in approach to capitalisation between the pair as a potential obstacle to a deal. Malone said that while Vodafone is focused on a low-risk approach, keeping debt under control and delivering cash returns to shareholders, he preferred “to grow equity value”.

In a conference call with analysts following Vodafone’s full-year results in May, Vodafone CEO Vittorio Colao, when asked about the possibility of Liberty Global acquiring Vodafone rather than the reverse, said that this was “a question for [Liberty Global CEO] Mike [Fries], not for me” and commented that such a transaction would command “a big price”.

On the question of the combination of Vodafone and Liberty Global generally, he said that such a deal would be “a matter of synergies and…convergence relative to market needs”. He said that it made sense in some markets but possibly not in others and that it would be necessary to “judge whether the price reflects both”.