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18 July 2019

EC lets Liberty flee Germany in pursuit of mobile pastures

The European Commission has predictably cleared the way for Vodafone to gobble up Liberty Global’s Unitymedia business in Germany, along with UPC cable assets in Hungary, Romania and the Czech Republic, with relatively minor concessions.

When Vodafone buttered up regulators in May with the promise of granting Telefónica Deutschland full access to the Unitymedia cable network, we said this had thrown the cat among the pigeons of an €18.4 billion deal which, prior to this olive branch, we viewed as unlikely to receive approval.

So, Liberty Global, the great cable superpower, is offloading something close to 10 million video subscribers to Vodafone, along with a similar number of internet subscribers. Naturally, the deal reduces the amount of competition in the country, but the EC believes the offer of allowing Telefónica Deutschland access to infrastructure will “replicate the competitive constraint exerted by Vodafone.”

Crucial to Vodafone’s Cable Wholesale Agreement filed recently is the promise that Telefónica Deutschland can deliver competitive OTT video and broadband services, by offering DSL lines with download speeds of up to 300 Mbps. But we know Telefónica has a poor presence in OTT video in Germany, while Vodafone is putting a bigger emphasis on the TV business to rival Deutsche Telekom in double and triple play.

Margrethe Vestager, the commission’s head of competition, said, “In our modern society, access to affordable and good quality broadband and TV services is almost as asked for as running water.”

Vodafone Deutschland CEO Hannes Amsetsreiter described the sealing of the deal as marking “the start of the second leg of our gigabit journey”.

“We’re pleased that the European Commission has recognized the considerable benefits that this important transaction brings to millions of consumers across Germany, Hungary, Romania and the Czech Republic. And it is good news for our employees in each market who will become part of a fixed-mobile national challenger with the strength and scale to take on national telco incumbents,” said CEO Mike Fries.

The deal reduces the Liberty Global footprint to the UK, Ireland, Belgium, Switzerland, Poland, Slovakia, and a 50% shareholding in the Dutch VodafoneZiggo business. But, as we reported from Liberty’s last set of results, even the usually stalwart Virgin Media suffered hefty video subscriber losses in Q1.

Liberty Global’s total video footprint suffered a decline of 52,800 subscribers during the quarter, with Virgin Media incurring a 24,300 decline across the UK and Ireland, dropping to a total base of just over 4.1 million. Indeed, the cord cutting saga in Europe seems minimal in comparison to recent pay TV losses at the US heavyweights but, as always, Europe eventually follows suit and Liberty Global looks to be playing its cards right by getting out of cable TV hard and fast.

Unitymedia saw declines of 15,400 video subs in the first quarter, falling to 6.27 million, while the UPC business in Central Europe experienced a loss of 13,100 video subscribers, dropping to 2.46 million.

From Liberty Global’s nine territories, just three filed positive video subscriber data, with Poland leading the pack with 8,400 gains, while Slovakia added 1,300 and Ireland just 1,000. A drop in the ocean really, so should we expect additional asset sales with Poland and Slovakia top of the list? Perhaps, but more pressingly, Liberty is reportedly on the market for a mobile operator or possibly broadcast assets.