Vodafone rekindles evaluation of Kabel Deutschland takeover


German law means any offer would value cable provider at no less than €6.34 billion.

Mobile phone company Vodafone Group PLC has revived its evaluation of a takeover of Germany’s largest cable operator Kabel Deutschland AG, a move that would strengthen its position in Europe’s largest economy.

Vodafone’s rekindled interest in Kabel Deutschland comes as a surprise after it struck a deal with Deutsche Telekom AG in mid-May that allows it to use the German incumbent’s network to offer its clients broadband and television services, which many analysts thought thereby rendered an acquisition of Kabel Deutschland unnecessary.

Vodafone–the world’s second-largest mobile operator after China Mobile Ltd–had put preliminary plans to acquire Kabel Deutschland on hold after these were leaked earlier this year, but has now intensified its efforts to potentially do the deal and recently held talks, a person familiar with the matter said. Another person familiar with the situation said Vodafone hasn’t made a final decision on when or whether to bid at all, but added the company is evaluating such a transaction.

Vodafone, whose operations span Europe, the U.S., Africa and the Middle East, has seen its profit dented in recent years by the protracted economic slowdown in Europe, which contributes the bulk of its revenue. Taking over Kabel Deutschland would help to attract customers, who are more loyal to offers bundling mobile, fixed-line, broadband and TV services.

Should Vodafone go ahead, an offer would have to value Germany’s largest cable operator at 71.63 euros ($93) per share or EUR6.34 billion in total, according to German takeover law, which requires bidders to offer at least the average share price of the past three months.

Chances for such a deal to materialize diminished when Vodafone, traditionally a mobile-only company, agreed on a wholesale deal with Deutsche Telekom, enabling it to better compete with cable operators that lure customers with bundled offers. Kabel Deutschland is has about 14 million subscriptions.

Vodafone declined to comment Monday on “market rumors,” but referred to its broadband deal with Deutsche Telekom. Kabel Deutschland also declined to comment.

Jochen Reichert, an analyst at Warburg Research, at the time of the deal in May said:”This agreement between Vodafone and Deutsche Telekom makes a takeover of Kabel Deutschland…unnecessary.”.

One of the people said, however, said the deal with Deutsche Telekom doesn’t address Vodafone’s issues in Germany in the same extent that a takeover of Kabel Deutschland would.

In April, it was reported that U.S.-based Liberty Global Inc., which owns Germany’s number two cable operator, has evaluated a takeover of Kabel Deutschland but it is unclear whether it is considering bidding for the company at this point. Liberty Global and Kabel Deutschland declined to comment at the time.