Vodafone Group Plc (VOD) has put on hold plans to approach Kabel Deutschland Holding AG (KD8) about a takeover bid after leaks of a potential offer complicated internal discussions, according to three people familiar with the matter.
Vodafone, which had intended to contact Kabel Deutschland after the cable provider’s earnings report last week, no longer has a time frame for a possible approach, said the people, who asked not to be identified because the deliberations are private. Kabel Deutschland shares fell 3.7 percent in Frankfurt, valuing the company at 5.9 billion euros ($7.7 billion).
Vodafone had intensified internal talks about increasing its share of the German market with Kabel Deutschland as John Malone’s Liberty Global Inc. (LBTYA:US) made a $16 billion offer to buy Virgin Media Inc. (VMED:US) Newbury, England-based Vodafone may still decide to make a bid at some point, two of the people said.
“This leaves Vodafone in an awkward situation,” Robin Bienenstock, an analyst at Sanford C. Bernstein in London, wrote in a note to clients. It opens the possibility that Kabel Deutschland will “enter a partnership relationship or more with another wireless player. This could leave Vodafone counter- bidding or simply marginalized.”
Royal KPN NV (KPN) and Telefonica Deutschland Holding AG, which both have German wireless operations, are potential candidates to partner with Kabel Deutschland, Bienenstock said.
Representatives of Vodafone and Kabel Deutschland, which is based near Munich, declined to comment.
Vodafone rose 2 percent to 165.1 pence in London. Kabel Deutschland shares had climbed 9 percent through yesterday since Manager Magazin reported an imminent Vodafone bid Feb. 13.
Credit default swaps insuring Kabel Deutschland’s bonds jumped 21 basis points to 183 basis points, indicating a higher perceived risk of default, according to data compiled by Bloomberg. Swaps pay the buyer face value in exchange for the underlying securities or the cash equivalent should a borrower fail to adhere to its debt agreements.
Vodafone, the world’s second-largest wireless carrier behind China Mobile Ltd. (941) is building up fixed-line assets to offload surging traffic from its mobile-phone networks. Kabel Deutschland, which provides television, Internet and phone services to more than 8 million German households, would help Vodafone protect its market share from other cable rivals, which are increasingly offering mobile packages.
Vodafone Chief Executive Officer Vittorio Colao said at the Mobile World Congress in Barcelona this week that he wants to offer bundled TV, Internet, phone and mobile services across Europe to consumers and businesses.
He isn’t alone in exploring how to expand fixed-line offerings, as mobile carriers across Europe look to deepen their relationships with customers through so-called quadruple play offerings. Vivendi SA’s SFR, France’s second-largest mobile provider, has held merger discussions with cable group Numericable SAS about a merger that would put the combined group in more French homes, people familiar with the matter have said.
Kabel Deutschland has an enterprise value, which includes debt, of about 9 billion euros. It is Germany’s biggest cable operator and competes with Liberty Global units in the country.
Deals involving telecommunications and media companies have totalled more than $60 billion so far this year, according to data compiled by Bloomberg.
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