The push by Vodafone Group PLC (LON:VOD) to become Europe's biggest quad-play telecoms, broadband and media provider will mean big competition for German heavyweight Deutsche Telekom AG but could also lead to changes in the UK telecoms market, according to analysts.
The FTSE-100 listed mobiles telecoms giant is acquiring operations in four European countries - Germany, Czech Republic, Hungary and Romania - from US cables giant Liberty Global for an enterprise value of €18.4bn.
READ: Vodafone to be Europe's leading next generation network owner after €18.4bn Liberty Global deal
The move will see Vodafone’s European network extended to 54mln cable/fibre homes 'on-net' and a total reach of 110mln homes and businesses.
David Madden market analyst at CMC Markets UK pointed out: “The motivation behind the move is to challenge Deutsche Telekom’s dominance in Germany.
“It would allow Vodafone to offer more competitive packages to customers, and it is estimated that the transaction would lead to savings of €1.5 billion through synergies.”
Deutsche Telekom shares fell back on the news as its hegemony looks to be threatened, and some analysts suggested European Union regulators may have concerns over the deal, raising a risk that it doesn’t happen.
Where does the money go?
But if the move does succeed, Neil Wilson, chief market analyst at Markets.com thinks it could also lead to a shake-up of things in the UK.
Wilson pointed out that the question to ask now is where does Liberty Global boss John Malone deploy that big chunk of cash?
The analyst thinks the UK “may be in his sights”, with Liberty Global - already the owner of cable broadband provider Virgin Media - owning a big stake in commercial broadcaster ITV plc (LON:ITV).
Wilson added: “The much-rumoured bid for ITV could be on the cards although Liberty may in fact be minded to go after o2 ahead of its much-rumoured stock market listing.”
The analyst said: “Tying up the assets of Virgin and o2 to offer bundled services/quad-play in the UK may be the number one option."
“One thing is for sure, with the mounting costs of building out network capacity and 5G etc, telecoms firms have decided they need to combine or merge assets to have the necessary scale,” Wilson concluded.