Future deals and restructuring to revive UK’s telecoms company will be a part of an acquisitive US groupLiberty Global, the US telecoms group chaired by “cable cowboy” John Malone, has bought a stake of nearly 5 per cent in Vodafone worth £1.2bn, as it bets on the revival of its UK rival.
The Denver-based company is one of a number of foreign acquirers who have taken positions in Vodafone. Vodafone has been in turmoil for the past twelve months and lost its chief executive. Vodafone’s value also fell by a third.
After revealing its 4.9 percent stake, Liberty Global stated that it would not seek a seat on the board and wasn’t considering offering to buy Vodafone.
Chief executive Mike Fries stated that the stock was cheap and that it was an opportunity to make a financial investment. He also said that his company had $3.5 billion in cash available to put to use.
Fries stated that Vodafone had “interesting catalysts”, including a proposed mergerwith CK Hutchison’s British business Three UK. Talks are ongoing.
“We have only one market with four mobile operators — everybody else has consolidated down to three — Ireland (Belgium), Holland (Holland), Switzerland.” He said that the UK was an exception. “We’re patient. Although we don’t know if any one or two things will happen overnight, we do understand the strategy that has been publicly disclosed and believe it to be a good one.
Liberty Global is the owner of Virgin Media O2, a competitor telecoms operator to Vodafone UK in partnership with Telefonica. The US-based group, which is highly acquisitive, has invested in 75 companies in telecoms, media, and infrastructure.
It joins an elite roster of international telecoms companies to help identify value in the UK’s weak performing group.In September, French billionaire Xavier Niel announced he had bought a 2.5 per cent stake Through his investment vehicle Atlas Investissement, he invested in Vodafone. He wants Vodafone’s business to be more efficient, reduce its debt and generate more cash. e&, a telecoms operator in the United Arab Emirates, has a 13% stake.
Liberty Global has been a major dealmaker in European telecoms for the past five year, buying, selling, and merging various operators. It closed a PS31bn merger agreement with Telefonica to merge Virgin Media’s business with O2 in 2021. In 2018, it also sold some assets from Germany and eastern Europe for EUR18.5bn.
According to someone familiar with the matter, the Vodafone stake was mostly funded through derivatives and only PS225mn of Liberty Global cash.
Vodafone had a difficult year following the FTSE 100 group’s pressure to streamline its business, eliminate poorly performing units, and decentralise global operations.
Cevian Capital , Europe’s largest activist investor, bought a share of undisclosed size and sought a shakeup. However, he was forced to sell out completely after realizing that change is unlikely.
At the end of last fiscal year, Nick Read, former chief executive, was forced to resign. Under his tenure, Vodafone had lost over 40% of its value. Margherita Della Valle, Vodafone’s chief financial officers, has replaced him on an interim basis.
Fries stated that he believes Vodafone has suffered the same structural problems as other European telecoms groups, including fragmented markets, regulator resistance to consolidation, and argued that the environment was improving.
“Regulators realized that investments should have reasonable returns. He said that they have started to support the industry in a greater way than in the past.
Fries stated that Liberty Global has not had discussions with Niel or e& about stakebuilding.