Vodafone Deal For Kabel Close To Collapse

Vodafone’s efforts to acquire Germany’s largest cable company Kabel Deutschland Holding AG are reportedly close to failing.

The British mobile operator is still well short of the necessary shareholder votes, ahead of the offer deadline at midnight tonight, according to reports.

Kabel deal

Vodafone first confirmed its interest in Kabel back in early June. And then later that same month, it was announced that it had beaten off its rival Liberty Global, which was unable to match Vodafone’s offer of €7.7 billion (£6.6bn) for the cable operator.

The deal, once it is completed, should grow Vodafone’s customer base by 8.5 million and give it the necessary infrastructure and networks to offer a so-called “quad-play” service in Germany, including mobile phone, home broadband, home telephone and television, all from a single provider.

Despite its struggles in the highly-competitive German market, Vodafone is looking to ramp up its service offerings in the country, and the Kabel deal would allow it to acquire its own backhaul capability in that market.

It did a similar thing in the UK last year after it acquired the struggling UK telecoms company Cable & Wireless Worldwide (C&WW) for £1 billion.

Kabel was founded as a spin-off from Deutsche Telecom in 1999, and is the largest cable television operator in Germany. It offers around 100 Pay TV channels, fibre broadband and landline phone services.

Shareholder support?

Under the terms of the deal, Vodafone is to pay a total of €7.7 billion or €84.50 (£71.22) per share.

But according to Reuters, as of Wednesday morning Vodafone has only so far secured close to 20 percent of shares in Kabel Deutschland, meaning it needs more than 55 percent more to be tendered for its takeover to succeed.

And Vodafone is on a tight deadline, because its offer for Kabel expires at Wednesday midnight, and it requires three quarters of Kabel’s shareholders to agree to sell the company. Sometimes in acquisition deals, shareholders will wait until the last possible moment, in the hopes that a rival bid will emerge.

But Vodafone is also having to contend with the fact that the largest shareholder in Kabel, US activist investment fund manager Paul Singer, is reportedly not happy with Vodafone’s deal, and wants the British operator to raise its offer.

Vodafone held 19.88 percent of Kabel Deutschland’s share capital by 1530 GMT (10.30 EDT) on 10 September, Reuters quoted Vodafone as saying in a statement. This was up from the 12 percent it held last Friday.

Vodafone did not respond to TechWeekEurope’s inquiries on Wednesday.

Strategic changes

The deal comes amid a number of strategic changes at the British operator.

Last week it finally confirmed it would exit the US market when it agreed sell its valuable stake in US operator Verizon Wireless for $130 billion ($84bn).

Vodafone has been gradually offloading its minority stakes in foreign markets over a number of years now. In April 2011 for example, Vodafone made a strategic withdrawal from the French market after it sold its 44 percent stake in that country’s second largest mobile operator, SFR, for €7.95 billion (£6.8bn).

The British operator has also sold off its 3.2 percent minority stake in China Mobile for £2.7 billion, and the operator also underwent an ignominious retreat from Japan when it exited its Japanese business (Softbank). It also sold off its 24.4 percent of the Polish operator, Polkomtel.

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