Vodafone has agreed to acquire Liberty Global’s operations in Germany, the Czech Republic, Hungary
and Romania for an enterprise value of €18.4 billion. It accelerates Vodafone’s converged communications strategy through in-market consolidation in Vodafone’s largest market, Germany, and in Vodafone’s Central and Eastern European (“CEE”) markets, the Czech Republic, Hungary and Romania.
Vodafone becomes the next generation network (“NGN”) owner in Europe, with 54 million cable/fibre homes ‘on-net’ and a total NGN reach of 110 million homes and businesses, including wholesale arrangements. Creating a converged national challenger to the dominant incumbent in Germany with the scale to accelerate achievement of the German government’s digital ambitions, bringing Gigabit connections to around 25 million German homes (62% of total German households) by 2022.
The combination of Vodafone and Unitymedia’s non-overlapping regional operations will establish a strong second national provider of digital infrastructure in the German market, building on Vodafone’s long track record in bringing sustainable and effective choice and competition to the German consumer and enterprise markets.
The collaboration transforms Vodafone’s fixed line and convergence strategy in key CEE markets, complementing
Vodafone’s existing mobile operations in the Czech Republic, Hungary and Romania. In these markets, the
combined businesses will reach over 6.4 million homes (39% of total households) and will serve 15.8 million
mobile, 1.8 million broadband and 2.1 million TV customers.
Vodafone intends to finance the acquisition using existing cash, new debt facilities (including hybrid
debt securities) and around €3 billion of mandatory convertible bonds (‘MCBs’). Vodafone will have the
option to repurchase the shares issued under the terms of the MCBs at maturity, thereby avoiding equity
dilution.
The collaboration increases exposure to resilient converged revenues and enhances Vodafone’s growth outlook, supporting an increase in Vodafone’s long-term targeted net debt/EBITDA ratio to 2.5 – 3.0x, consistent with a solid investment grade credit rating. Pro forma for the Transaction, Vodafone’s FY2018 net debt/EBITDA3 is expected to be at the upper end of this range.
The Transaction is subject to regulatory approval, with completion anticipated around the middle of calendar 2019.
Vodafone Group chief executive Vittorio Colao said: “This transaction will create the first truly converged pan-European champion of competition. It represents a step change in Europe’s transition to a Gigabit Society and a transformative combination for Vodafone that will generate significant value for shareholders.
We are committed to accelerating and deepening investment in next generation mobile and fixed networks, building on Vodafone’s track record of ensuring that customers benefit from the choice of a strong and sustainable challenger to dominant incumbent operators. Vodafone will become Europe’s leading next generation network owner, serving the largest number of mobile customers and households across the EU.”
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