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February 19, 2013 4:05 pm
Those pesky antitrust officials. Just as the market gets excited about a possible tie-up between mobile operator Vodafone and Kabel Deutschland, Germany’s largest cable company by customers, they tell the latter that it cannot go ahead with a domestic cable merger unless it makes bigger concessions. According to KD, the Bundeskartellamt wants to see 60 per cent of Tele Columbus’s networks in eastern Germany divested – twice its offered solution. So the deal is likely to fail. And that, runs the thinking, has implications for a potentially synergistic merger between Vodafone, with a significant German broadband business, and KD, since this would also face antitrust scrutiny. Their shares fell 2 and 7 per cent respectively.
It all looks a trifle knee-jerk. KD’s Tele Columbus deal had appeared troublesome for months – largely because of the Bundeskartellamt’s clearly-voiced concerns about maintaining competition for housing association TV contracts and its record. (Officials only allowed a deal between Liberty Global’s German Unitymedia and a smaller regional cable network after extensive conditions). Direct read-across to any Vodafone/KD deal may be limited: while the companies compete on broadband/telephony, Vodafone is not in the pay-TV business, and there would be no consolidation of physical networks.
More pertinent is whether failure of the Tele deal reduces KD’s appeal as a merger partner. Some estimates suggested that cost and revenue synergies made this worth around €5/share to KD. But the cable group’s marriage prospects are being driven by a more fundamental consideration – namely, the potential for offering consumers four-way bundles of TV, broadband, telephony and mobile services. Pressure is on Vodafone to come up with viable “convergence” solutions. On that score, nothing has changed.
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