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50:50 joint venture deal to close at end-2016, will use both Vodafone and Ziggo brands.
Vodafone and Liberty Global announced late on Monday that they have finalised an agreement to merge their operations in the Netherlands into a 50:50 joint venture.
Under the terms of the deal, Vodafone will pay Liberty Global €1 billion to equalise the value of the assets.
The companies expect the deal close around the end of this year, subject to consultations with the works councils of both companies and various regulatory approvals.
The merger brings together mobile operator Vodafone Netherlands, the second largest mobile operator in the country, and Liberty Global-owned cable broadband and TV player Ziggo, creating a stronger converged player to rival incumbent operator KPN.
"Together we will be a stronger competitor in the Netherlands, benefiting customers of both companies and the market as a whole," said Vodafone chief executive Vittorio Colao.
"This transaction marks a continuation of Vodafone’s market-by-market convergence strategy and we look forward to partnering with Liberty Global to create a fully integrated provider in one of our core European markets," he said.
Vodafone has made a number of acquisitions in recent years, including cable operator Ono in Spain and Germany’s Kabel Deutschland. It has also rolled out a fixed broadband offering in the U.K. and an IPTV service in Ireland over the past few months.
The telco held talks with Liberty Global last year over a possible broader merger of assets in various European markets – the U.K., Germany and the Netherlands being the most often mentioned – but talks came to nothing. However, last month the operators confirmed they were once again back round the table with regard to a deal in the Netherlands, although they insisted that the talks did not include any other market.
Liberty Global is pursuing a similar strategy to Vodafone. It has been bulking up across its operations and most recently got the go-ahead from the European Commission for its €1.33 billion acquisition of Belgian mobile operator Base.
"Throughout Europe, Liberty is capitalising on the rising demand for lightning-fast broadband speeds, the coolest digital TV platforms and apps, and seamless 4G wireless connectivity," Liberty Global CEO Mike Fries said on Monday. "Soon, both Ziggo and Vodafone customers in the Netherlands will be at the forefront of this new world, and we couldn’t be more excited about our partnership with Vodafone."
The joint venture will use both the Vodafone and Ziggo brands, the companies said. Together, they had more than 15 million revenue-generating units in the Netherlands at end-2015, comprising 4.2 million video customers, 3.2 million high-speed broadband, 2.6 million fixed-line telephony connections and 5.3 million mobile subscribers.
The firms expect to realise run-rate cost and capex synergies of €280 million per year by the fifth full year after the closure of the transaction, but the JV will also incur around €350 million in integration costs, most of which will come in the first three years.
The synergies will come from the ability to use one another’s networks at a lower cost than a standard wholesale arrangement, the combination of infrastructure and IT systems, lower marketing costs, reduced general and admin costs, and the rationalisation of sites.
