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May day set for Vodafone-Liberty decision as EC drags its feet

To the surprise of absolutely no one, the European Commission has officially opened “in-depth” proceedings to investigate the sale of certain Liberty Global cable assets to Vodafone, confirming last week’s rumors sparked by Reuters. As we sign off our final issue of the year, Faultline Online Reporter will pick up the gavel dropped by the EC this week at the start of May 2019, when a conclusive decision is expected.

It pains us to say this again, but it should not require a crack team of rocket scientists to establish how waving the deal through would reduce competition and create the continent’s largest cable and high-speed broadband service provider, and therefore should have very little merit for approval. Unfortunately, now even the most esteemed academics would struggle to calculate what constitutes antitrust considering how low the bar was set when Liberty Global was allowed to acquire Ziggo then later merge it with Vodafone in the Netherlands.

Excuse us for sounding like a broken record but the point must be hammered home until someone in power takes a stand, so this week’s progress is refreshing news, although few industry observers – us included – are optimistic. The likely outcome is an approved deal with some minimum assurances from Vodafone.

Back to the news, the Commission has said its antitrust microscope will be focused on Germany and the Czech Republic in particular, in a proposed €18.4 billion ($21 billion) deal for cable assets also covering Hungary and Romania. Specifically, the Commission has highlighted how a deal would gift the merged entity anticompetitive control over negotiations with TV broadcasters, as well as lead to under-investments in broadband in Germany, while the takeover could also have severe ramifications for TV, mobile and fixed line markets in the Czech Republic.

Deal backers will argue that a merged Unitymedia-Vodafone would be marginally less dominant in pay TV than it was during previous merger attempts to rival incumbent Deutsche Telekom, dating way back to 2000. But still, the merged entity would have a footprint of 14 million TV households from a total of 37 million, as well as some 13 million for high-speed broadband – in a territory notoriously under-penetrated in pay TV and broadband. Deutsche Telekom in comparison has 13.5 million broadband subscribers, although most of these are on sub 50 Mbps speeds.

EU competition commissioner Margrethe Vestager said, “It’s important that all EU consumers have access to affordable and good quality telephone and TV services. Our in-depth investigation aims to ensure that Vodafone’s acquisition of Liberty Global’s telecommunications businesses in the Czech Republic, Germany, Hungary and Romania will not lead to higher prices, less choice and reduced innovation in telecoms and TV services for consumers.”

Liberty Global CEO Mike Fries said, “It is clear that the EU is retaining regulatory authority over the case. This provides us with the appropriate forum to demonstrate the consumer benefits that will be delivered by the creation of fully converged, fixed-mobile operators in these four markets.”

Vodafone has not yet commented, although execs are probably on the phone to friends at the Commission as we speak, possibly proposing minor concessions. The UK telco has come too far to allow any deal to slip through its fingers.

 

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