Bloomberg News

Malone Isn’t Seeking Bids as Vodafone Weighs How to Use Cash

September 02, 2013

U.S. Cable Magnate John Malone

U.S. cable magnate John Malone said by e-mail to Bloomberg News in response to questions on a possible tie-up with Vodafone, “As a fiduciary for our shareholders, we would consider any proposals. However, we're happy as we are at LGI and think well positioned to grow and create shareholder value as an independent.” Photographer: David Paul Morris/Bloomberg

John Malone, the U.S. cable magnate who built Europe’s largest cable-television operator through acquisitions, said while he would consider offers for Liberty Global Plc, he’s “happy” with the company as is.

As Vodafone Group Plc (VOD) agreed on the $130 billion sale of its stake in U.S. venture Verizon Wireless, the question of how the second-biggest mobile phone company could spend the windfall has focused on its recent efforts to expand in cable. Since Vodafone agreed to buy Germany’s Kabel Deutschland Holding AG (KD8) in June, speculation has also shifted to whether Liberty Global would be among its next targets.

“As a fiduciary for our shareholders, we would consider any proposals,” Malone said by e-mail to Bloomberg News in response to questions on a possible tie-up with Vodafone. “However, we’re happy as we are at LGI and think well positioned to grow and create shareholder value as an independent.”

Vodafone said today proceeds from the sale of its stake in the mobile-phone venture to majority owner Verizon Communications Inc. (VZ:US) will include $58.9 billion in cash as well as Verizon shares. The Newbury, England-based company bested Malone this summer for Kabel Deutschland, and could use the proceeds of the Verizon sale to snap up more assets, both to expand outside of wireless and as a defense against AT&T Inc., which has been scouring Europe for telecommunications assets.

‘Real Candidate’

Other independent European cable operators include Spain’s Grupo Corporativo ONO SA, France’s Numericable SAS and Zon Optimus SGPS in Portugal.

“Liberty is a real candidate” for Vodafone and “Malone is in strongest position and can and will play hard on price,” Stuart Gordon, an analyst with Berenberg Bank in London, said today in an e-mail. Such a deal “would not solve Spain or Italy, so would leave ONO, Jazztel and possible Fastweb as potential alternative candidates.”

Jazztel Plc (JAZ) is a small Spanish carrier, and Fastweb is an Italian fixed-line phone company controlled by Swisscom AG.

Liberty Global, with cable operations in 14 countries including Germany and the Netherlands, has a market capitalization of $30 billion. The London-based company reported net debt (LBTYA:US)of almost $42 billion as of June 30. This year, it bought the U.K.’s Virgin Media Inc. for $16 billion and has raised its stake in Dutch cable provider Ziggo NV. (ZIGGO)

European Wave

Malone told Bloomberg News in a July interview that Liberty Global would also look to southern Europe for growth opportunities.

“We’re getting to the point where in northern Europe, we’re pretty much as far as we can go,” Malone said in that interview. “If southern Europe sort of hits the bottom, as it were, there are things we can do further south in scale.”

Vodafone’s sale of its Verizon Wireless stake could give it the cash to broaden a nascent wave of consolidation in Europe. In addition to Liberty Global’s British and Dutch moves, and its foiled pass at Kabel Deutschland, Mexican billionaire Carlos Slim intervened in Telefonica SA’s $11 billion agreement to acquire Royal KPN NV’s German E-Plus unit.

Slim’s America Movil SAB, which owns almost 30 percent in KPN, bid for majority control of The Hague-based phone company last month for 7.2 billion euros ($9.5 billion).

Consolidation Proof

Earlier this year, Tele2 AB sold its Russian wireless unit to state-owned lender VTB Group for $3.6 billion in cash and debt. OAO Mobile TeleSystems continued to pursue the asset even after the sale was completed.

“This is proof that we are entering a phase in which consolidation is happening and will continue,” Telefonica Chief Operating Officer Jose Maria Alvarez-Pallete said today in Santander, Spain. Mergers like “our own deal in Germany” and network-sharing agreements are all possible in the wake of the Verizon Wireless deal, he said.

The sale is “spectacular, huge,” ONO Chief Executive Officer Rosalia Portela said in an interview in Santander. An initial public offering is still ONO’s priority, when the markets recover, she said at the conference. She declined to comment on speculation of Vodafone’s interest in the company.

To contact the reporters on this story: Kristen Schweizer in London at kschweizer1@bloomberg.net; Manuel Baigorri in Madrid at mbaigorri@bloomberg.net; Adam Ewing in Stockholm at aewing5@bloomberg.net

To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net


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Companies Mentioned

  • VZ
    (Verizon Communications Inc)
    • $50.35 USD
    • 0.66
    • 1.31%
  • LBTYA
    (Liberty Global PLC)
    • $44.36 USD
    • 0.86
    • 1.94%
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