The European Commission has given its final approval of the sale of Liberty Global’s operations in Germany, Hungary, Romania and the Czech Republic to Vodafone Group. The transaction, announced May 9th 2018, has a total enterprise value of approximately €19 billion. All regulatory conditions now are met in alignment with the original terms and the transaction is now expected to close by July 31st.
“We’re pleased that the European Commission has recognised the considerable benefits that this important transaction brings to millions of consumers across Germany, Hungary, Romania and the Czech Republic,” stated Mike Fries, Chief Executive Officer of Liberty Global. “And it is good news for our employees in each market who will become part of a fixed-mobile national challenger with the strength and scale to take on national telco incumbents.”
Vodafone will become Europe’s leading converged operator, with 116.3 million mobile customers, 24.2 million broadband customers and 22.1 million TV customers across 13 European countries.
Vodafone will own the largest next-generation network in Europe, as well as one of the continent’s largest TV platforms, and more than half of Group revenues will come from fixed and converged services. As a leading European technology communications champion, the company will be able to accelerate the delivery of the Gigabit society to over 100 million people across the continent.
Vodafone Group CEO Nick Read said: “With the European Commission’s approval of this transaction, Vodafone transforms into Europe’s largest fully-converged communications operator, accelerating innovation through our gigabit networks and bringing greater benefits to millions of customers in Germany, the Czech Republic, Hungary and Romania. This is a significant step toward enabling truly digital societies for our customers.”
In Germany, Vodafone will deliver gigabit mobile speeds to 20 million people by 2021 and fixed gigabit connections to 25 million households by 2022. The combined company will be well placed to help deliver the German government’s digital ambitions, providing sustainable and effective competition and choice in digital infrastructure and converged services. As previously announced, Vodafone has also entered into a wholesale cable agreement to provide broadband services, with download speeds of up to 300 Mbps, to Telefónica Deutschland.
The transaction will also bring forward the provision of converged communications services in Central and Eastern Europe, increasing competition and customer choice, acting as a catalyst for further innovation in terms of both network and service provision and making the digital society a reality. In these markets, the combined businesses will upgrade their fixed gigabit networks to reach over 6.4 million homes (39 per cent of total households) in the coming years.
The transaction is expected to generate cost and capex synergies with a net present value of over €6 billion after integration costs, and revenue synergies with an NPV exceeding €1.5 billion from cross selling to the combined customer base. Together with the standalone growth potential of the acquired assets, these synergies support double-digit free cash flow per share accretion (before integration costs) from the third year post completion for Vodafone Group.
Commissioner Margrethe Vestager, in charge of competition policy, said: “In our modern society access to affordable and good quality broadband and TV services is almost as asked for as running water. We have today approved Vodafone’s purchase of Liberty Global’s business in Czechia, Germany, Hungary and Romania subject to remedies designed to ensure that customers will continue enjoying fair prices, high-quality services and innovative products.”
During its in-depth investigation, the Commission gathered extensive information and received feedback from customers, suppliers and competitors of the merging companies, as well as from other stakeholders.
Following its investigation, the Commission had concerns that, in Germany, the transaction:
Following its investigation, the Commission did not find competition concerns regarding:
The proposed remedies
To address the Commission’s competition concerns, Vodafone offered the following commitments:
The Commission therefore concluded that the transaction, as modified by the commitments, would no longer raise competition concerns. This decision is conditional upon the full compliance with the commitments.
After completion of the transaction, Liberty Global will continue to be one of the world’s leading converged video, broadband and communications companies, with consolidated operations in the United Kingdom, Ireland, Belgium, Switzerland, Poland and Slovakia. Together, these country operations reach 25 million homes, account for 25 million video, broadband and fixed-line telephony subscribers and six million mobile services. In addition to a significant cash balance as a result of the proceeds, Liberty Global also owns 50 per cent of VodafoneZiggo, a joint venture in the Netherlands with 4 million customers subscribing to 10 million fixed-line and 5 million mobile services.