After months of ‘on-off’ speculation and recent confirmation that possible merger talks had recommenced, Liberty Global and Vodafone have confirmed they are to merge their Dutch operations in a 50-50 joint venture they say will create a national unified communications provider in the Netherlands with complementary strengths across video, broadband, mobile and B2B services.
They say that combining cable MSO’s Ziggo’s fibre-rich broadband network with Vodafone’s leading mobile operations will create a stronger fixed and mobile competitor in the Dutch market, delivering significant benefits for consumers, businesses and the public sector through investment in digital infrastructure and customer experience.
The total cost, capex and revenue synergies with an estimated net present value of approximately €3.5 billion after integration costs. 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 equalise ownership in the joint venture. Vodafone Netherlands will be contributed on a debt and cash free basis.
According to Vodafone Group Chief Executive, Vittorio Colao, the combination of Vodafone’s leading mobile business with Ziggo’s successful broadband and TV business creates a strong and competitive integrated communications player, which will invest in digital infrastructure, entertainment services and productivity applications for Dutch consumer, business and public sector customers. “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, Chief Executive Officer 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. We look forward to working together to develop cutting-edge converged services for the Dutch market.”
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.
By combining Ziggo’s Horizon TV product suite, 200 Mbps nationwide broadband Internet and extensive Wi-Fi network, together with Vodafone’s market-leading, data-rich 4G mobile propositions, Dutch consumers will enjoy a high-quality customer experience with superior connectivity and entertainment both in and outside the home.
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. This will ensure sustainable competition in the small, medium and large business segments across the Netherlands, which will benefit the overall Dutch economy.
Vodafone and Liberty Global will ensure that the JV will benefit from the scale benefits and complementary expertise of each partner. The parties have agreed to provide a suite of services to the JV post completion. These services principally comprise IT and technology-related services, procurement, brand management and other support services. The annual charges to the JV will depend on the actual level of services required by the JV.
The transaction is subject to prior regulatory approval. Liberty Global and Vodafone have undertaken preparatory work on the required competition filings and will formally request approval from the European Commission in due course.
Based on the required steps and subject to the customary closing conditions and approvals, Liberty Global and Vodafone anticipate that completion will take place around the end of 2016.
The transaction is not subject to Vodafone or Liberty Global shareholder approvals.
“Ultimately, the joint venture between Vodafone and Liberty Global creates a far stronger rival to KPN and will clearly put more pressure on the company,” noted Paolo Pescatore, Director, Multiplay and Media at CCS Insight.
“In this market, the tie-up is extremely complementary and makes perfect sense. Vodafone has not made significant headway in the consumer fixed line market and Liberty Global is keen to add mobile services. One clear benefit of the JV is the ability to introduce services much more quickly, but clear decisions need to be made on brand and retail. This follows failed asset swap talks between both companies on a wider scale and it seems that both companies will now be looking to replicate this approach in other markets.”