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Vodafone and Liberty Global walk away from asset swap talks

Vodafone and Virgin Media owner Liberty Global have terminated talks over a future relationship

Vodafone has walked away from negotiations with US cable conglomerate – and owner of Virgin Media – Liberty Global, over a possible asset swap agreement in the UK.

Vodafone confirmed it had ended the talks in a brief statement on the morning of 28 September 2015. The mobile network operator (MNO) gave no indication as to why it had chosen to terminate the discussions.

The two firms had previously confirmed they were in talks over an asset swap – thought probably to consist of cable TV assets in Germany and the UK – in June 2015.

John Malone, the outspoken head of Liberty Global, said at the time that he saw substantial synergies between the two firms in a number of European markets.

However, earlier in September 2015, Malone hinted that things were not going well when he told Bloomberg that the talks had reached an impasse on a number of points.

“Conceptually there could be some real value created, but realistically we haven’t been able to figure out a way to do that in a mutually successful way,” he said.

The possibility of a combination of the two businesses dates back further, first arising in late 2014, following the preliminary discussions between BT and a number of MNOs, which ultimately resulted in its acquisition of EE and, separately, Three’s pending acquisition of O2.

At the time, the market speculated the growth of quad-play operators – suppliers offering broadband, fixed, mobile and pay TV services – meant Vodafone thought itself under pressure to act to keep itself in the game.

A full merger between the two would have resulted in the creation of Europe’s largest communications company, with revenues approaching $130bn (£82.8bn). In the UK, the merger would have handed Vodafone control of one of the largest consumer broadband and cable television companies in the market, as well as substantial fibre network assets.

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I appears that the current price war between Sky and BT as they fight for broadband customers while Apple, Amazon, Google, Netflix and others cream off the content customers with alternative business models, indicates that the price for Virgin's UK networks was way too high. The alternative of infrastructure and content partnership deals with Sky and the future proof point-to-point fibre networks (City Fibre, Gigaclear etc.) may have had as much influence as the falling marginal value of Virgin's accumulated tax losses to a UK-based player.
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