February 2, 2016 / 1:46 PM / 3 years ago

Vodafone in talks with Liberty Global on Dutch joint venture

LONDON (Reuters) - Mobile phone networks operator Vodafone said on Tuesday it was in talks with John Malone’s cable company Liberty Global about forming a joint venture in the Netherlands.

The headquarters of Vodafone Germany is seen in Duesseldorf, Germany in this September 12, 2013 file photo. REUTERS/Ina Fassbender/Files

Liberty Global owns Ziggo, the largest cable TV operator in the Netherlands, while Vodafone is the second biggest mobile network operator, behind KPN.

The two companies were in protracted talks about an exchange of assets or broader merger across various European markets last year but could not agree on valuations.

Vodafone said it was now in talks with Liberty Global specifically about the creation of a joint venture in the Netherlands that would incorporate both companies’ local operating businesses.

“The discussions are ongoing and do not extend beyond the creation of a joint venture in the Netherlands,” it said.

Shares in Vodafone reversed earlier gains to trade down 2 percent at 221 pence at 1553 GMT, reflecting some investors’ disappointment that any tie-up was limited to the Netherlands.

Liberty’s shares were flat in New York.

Vodafone is coming under increasing pressure in national markets from former national telecoms network monopolies like Deutsche Telekom, Telefonica, KPN and now BT, which are able to sell packages of broadband internet, TV and mobile telecoms services.

It is responding with a two-pronged strategy of building its own infrastructure and seeking complementary deals with other companies country by country and has already spent 15 billion euros buying cable operators Kabel Deutschland in Germany and Ono in Spain.

Just last week, analyst Jerry Dellis at Jefferies said Vodafone needed to buy Liberty Global to secure its long-term prospects.

Stephane Beyazian at Raymond James said some investors expected a wider deal between the two covering more markets - they have mutual operations in seven European countries - or even that Liberty Global would buy out Vodafone.

“Today what you see is the market reaction of some of the bullish investors that were hopeful of a much bigger combination, but it doesn’t prevent it from happening longer term,” he said.

There was pressure to do something quickly in the Netherlands because KPN’s quad-play bundle was proving popular with customers, he said.

A tie-up in the Netherlands would bring together Vodafone’s 5.2 million mobile customers with Ziggo’s 4.1 million cable subscribers, many of whom also take broadband internet and fixed line telecoms.

(Corrects headline and paragraph 1 to substitute joint venture for swap of assets.)

Additional reporting by Thomas Escritt in Amsterdam; Editing by Greg Mahlich

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