A bit of history to start. In November 2010, Vodafone announced the launch of its 'total communications' strategy. At first it took an 'asset light' approach to the fixed market, focusing on buying in wholesale services from the incumbent. Since then it's started rolling out its own FTTH networks (Ireland, Portugal, Italy, Spain) and buying cable companies (Germany, Spain). Vodafone is using the proceeds from selling its stake in US operator Verizon Wireless to boost investments under its Project Spring programme. Liberty Global is still taking an 'asset light' approach to the mobile market, but has made its first acquisition of a mobile network (Base in Belgium). Liberty Global aims to build a pan-European full MVNO platform.
While Vodafone and Liberty Global's footprints are complementary in many ways, there is overlap in several countries that would lead to in-depth competition investigations. From Vodafone's perspective, we can see a pattern that may result in a merger. As noted above, Vodafone is increasingly choosing to own its own fixed network ('facilities-based'). It also makes no secret of the fact that it believes more in FTTH than DSL, regardless of the new possibilities for upgrading copper (VDSL2, pair bonding, vectoring, G.fast). In countries where it doesn't seem room to roll out FTTH on its own, like the Netherlands, it remains dependent on the incumbent for wholesale services. This drives its support for open access networks, and in some cases like the UK, even structural separation of the incumbent. The company is not quiet about its stance, in contrast to for example Tele2, which has been quite mild about its wholesale relationship with KPN.
This all suggests that a merger with Liberty Global is unavoidable. To obtain regulatory clearance in every country, Vodafone can try to show that this is the only way to break the power of the incumbents and create a strong competitor. Vodafone's recent path of buying cable operators, deploying FTTH and even suing incumbents can all support its defense of a merger with Liberty Global.
Concessions will be involved, and Vodafone is already creating room for this. Promising open access to cable will help quicken the regulatory process. If Vodafone also pledges to upgrade the cable networks to fibre over time, government authorities can hardly withhold their approval.
