Vodafone Group Plc (LON:VOD) will become the biggest telecoms company in Europe by the end of the month after it won regulatory clearance for its €18.4bn acquisition of Liberty Global's European cable operations.
The European Commission on Thursday gave the green light for the deal, which encompasses Liberty's businesses in Germany, Czech Republic, Hungary and Romania, subject to a set of package of remedies agreed by the FTSE 100 group.
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Having intially voiced worries about competition, the EC said it did not find any antitrust concerns over prices or quality in any of the retail TV markets in Germany, and was reassured that the deal will not reduce investments in next-generation networks in the country, nor shut out standalone providers of fixed or mobile telecommunications services in Czechia.
Following the deal, more than half of Vodafone’s group revenues will come from fixed and converged services, with a network of 116.3mln mobile customers, 24.2mln broadband customers and 22.1mln TV customers across 13 European countries.
“With the EC’s approval of this transaction, Vodafone transforms into Europe's largest fully-converged communications operator, accelerating innovation through our gigabit networks,” said Vodafone chief executive Nick Read.
Merger 'synergies' seen
Read, who has raised €4bn from a debt issue to finance the acquisition, is eyeing €6bn of cost and capital expenditure efficiencies from the deal, after integration costs, with a revenue benefits topping €1.5bn from cross-selling to the combined customer base.
Vodafone, which in May slashed its dividend 40% in order to provide some "financial headroom" for its plans to cut its €27bn debt pile and invest in the business, aims to recoup a double-digit boost to free cash flow per share from the third year post completion of the Liberty deal, including from growth in the Liberty assets themselves.
The package of remedies agreed with the EC includes a deal to sell access to the German cable network to O2 owner Telefónica, which will then offer high-speed broadband to customers on Vodafone and Liberty’s Unitymedia cable network across Germany.
Other agreed remedies include agreements to continue to carry signals for free-to-air broadcasters and not raise their feed-in fees.
Vodafone shares rose 1.3% to 127.75p by mid-morning on Thursday.