Liberty Global eyes up further European market consolidation

Last May it was announced that Telefonica’s O2 and Virgin Media, owned by Liberty Global, were seeking to merge their UK operations in a deal worth an enormous £31 billion. The deal is one of the largest in the telecoms sector in recent years, potentially creating a converged operator of a scale large enough to challenge BT’s UK hegemony.

 

The deal is expected to be completed this summer, though it is currently facing investigations by the UK’s Competition and Markets Authority (CMA), who fear that the merger could leave the newly combined entity with an incentive to raise prices or reduce quality of wholesale services. Nonetheless, the parent companies themselves remain confident that the move is actually good for the UK telecoms sector and will boost competition. 

 

“Our view remains that this transaction is pro-competitive and we continue to expect closing around the middle of this year,” said Telefonica and Liberty Global in a joint statement. 

 

Liberty Global also completed the acquisition of Switzerland’s Sunrise Communications in November for $7.4 billion.

 

But despite the enormous scale of these moves, more deals could still be on the cards for Liberty Global, who suggest that other European markets could be well positioned or consolidation.

 

Speaking on an analyst call last week, CEO Mike Fries said that Ireland and Poland were potential target markets, suggesting it would be “surprising” if no deals had been struck in these countries by the end of the year.

 

When it comes to Ireland, Liberty Global’s Virgin Media Ireland has around one million broadband, pay-TV and fixed line customers. Partnerships with mobile players Vodafone, Three, or eir all present viable opportunities for M&A, with Vodafone perhaps the most appealing. Such a move would present its own issues, however, since Vodafone itself already has a strong presence in the broadband market, with a merger threatening to create something of a dominant force in the market.

 

The situation is somewhat similar in Poland, where the mobile market already has four players: Deutsche Telekom, Orange, Play and Polkomtel. Here, Liberty Global’s Polish fibre arm UPC has around 3.3 million customers offering interesting potential for a tie up. In fact, in 2018 Liberty Global tried to buy Multimedia Polska for around $800 million, only to be thwarted by the regulator.

 

But it is not only in M&A where Liberty Global is considering some major changes. In the same call, Fries noted that Vodafone Ziggo, its joint venture with Vodafone in the Netherlands, could be looking at an IPO some time during the next couple of years. He said that while company was delivering “really meaningful cash” right now, looking at listing the company could be a potential opportunity. 

 

“Would it be an opportunity to look at listing? I would say possibly,” said Fries, adding “keep your eyes on it.”