Vodafone has won approval from the European Commission to take over Liberty Global's cable operations in Germany, Hungary, Czech Republic and Romania. The competition clearance comes with a number of conditions in the German market, such as opening up the cable network to a rival and not increasing fees or imposing conditions on broadcasters.
Vodafone first agreed the takeover for EUR 18.4 billion over a year ago, in May 2018. In December 2018, the Commission opened an in-depth investigation into the deal, citing competition concerns mainly in the German market. The takeover of German cable operator Unitymedia would eliminate a competitor on the broadband market, as well as significantly strengthen Vodafone's market position vis-a-vis broadcasters.
To alleviate the concerns, Vodafone has agreed to open up the cable network to Telefonica Deutschland, which will be able to provide broadband and TV services over the network. This creates a new competitor on the cable network, replacing Vodafone, as well as strengthening Telefonica's ability to compete in the overall broadband market. The German telecommunications regulator will help in monitoring compliance with this, the Commission said.
On the broadcast market, Vodafone has agreed to not restrict broadcasters on its cable network from distributing their content also via OTT services. This commitment is expected to counterbalance the increased market power of the merged entity and eliminates the concern that Vodafone could hinder the develop of OTT services. Furthermore, the company agreed not to increase the feed-in fees paid by free-to-air broadcasters for the transmission of their linear TV channels on Vodafone's cable network in Germany and to continue to carry their HbbTV signals.
Following the regulatory approval, Vodafone said it expects to complete the transaction with Liberty Global by the end of July. The operator expects to generate cost and capex synergies from the merger worth over EUR 6 billion after integration costs, and revenue synergies of more than EUR 1.5 billion from cross-selling to the combined customer base. Within three years of completing the takeover, Vodafone expects the assets to contribute to double-digit growth in free cash flow per share (excluding integration costs).
