Vodafone to forge ties with Liberty Global for Dutch market

February 16
3:32 AM 2016

UK's mobile major Vodafone and US cable group firm Liberty Global have agreed to merge their operations in Netherlands market. The combined entity is expected to generate over 15 million revenues generating units. After taking into consideration of Ziggo's net debt of €7.3 billion, Vodafone will make a cash payment of €1 billion to Liberty Global.

Vodafone will combine its mobile operations with billionaire John Malon-owned Liberty Global's Ziggo broadband network in Netherlands. Vodafone has agreed to pay €1 billion (£770 million) for the ownership in the joint venture. The combined entity's total cost and revenue synergies would be €3 billion by the time deal is completed by the end of 2016. 

The Telegraph reports that Vodafone is hoping that the combined entity will become a strong player in the Netherlands market. The deal will benefit the customers of both organizations. The deal comes as part of Vodafone's strategy of market-by-market. After the alliance, the combined entity of Vodafone and Liberty Global will become an integrated provider in the European market. 

Earlier, both the organizations explored a series of asset swaps and an outright merger, but couldn't become reality and ended in September 2014. They also dropped the discussions over combining mobile and cable networks in the UK, German and other European markets. Discussions were resumed in later 2015, but concerned assets in Netherlands. 

Later both the organizations have arrived to a conclusion on creating a 50:50 joint venture. The deal is expected to be completed by end of 2016. The total cost, capital expenditure and revenues synergies with a net present value (NPV) would be €3.5 billion after the integration costs. After deducting Ziggo's net debt of €7.3 billion, Vodafone will offer a cash payment of €1 billion to Liberty Global to equate its ownership in the joint venture, as reported by Financial Times.

Vittorio Colao, Vodafone's chief executive, said: "The combination of Vodafone's leading mobile business with Ziggo's successful broadband and TV business creates a strong and competitive integrated communications player, which will invest in digital infrastructure, entertainment services and productivity applications for Dutch consumer, business and public sector customers."

With over 15 million customers, the combined entity will become second largest telecom company in the Netherlands after KPN. Both the companies foresee synergies to the tune of €280 million annually and €3.5 billion altogether after the cost reductions, according to Bangkok Post. The US-based Liberty Global acquired Netherlands' cable operator Ziggo in 2014 for €10 billion. 

Mike Fries, chief executive of Liberty Global, said: "This powerful combination of the best fixed and mobile networks in the Netherlands will deliver huge benefits to Dutch consumers and businesses." The joint venture's board will have three representatives from each of Vodafone and Liberty Global. Liberty Global is capitalizing on rising demand for high-speed broadband networks in Europe. The combined entity will offer digital TV platforms, apps and seamless 4G wireless connectivity. 

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