- The telecommunications market in the United Kingdom will change its structure after the company that owns Virgin Media-O2 finalizes the purchase of Vodafone.
- Vodafone has already launched a proposed combination with Three UK, and talks are currently underway.
- Vodafone is not doing well; in the last 12 months, the company’s share price has fallen 29%. Inflation is rising and, with it, costs.
The UK mobile market could undergo a major shake-up after Virgin Media owner O2 bought Vodafone and said the sector was ripe for further consolidation.
Vodafone has already launched a proposed merger with Three UK, talks on which are ongoing.
Liberty Global, which owns telecommunications businesses across Europe, acquired a 4.92 percent stake in Vodafone.
The stake Vodafone disclosed is worth around £1.2 billion. The investment sent the company’s share price up 3.5 percent in the hours following the announcement.
Liberty Global chief executive Mike Fries said Vodafone was “good value” despite recent difficulties. “We believe, like many others, that Vodafone’s current share price does not reflect the underlying long-term value of its operating business, or its announced consolidation and infrastructure opportunities,” he said.
Vodafone and Virgin Media O2 deal
Over the past year, Vodafone’s share price has fallen 29 percent. Inflation is driving up costs while squeezing its customers.
In its half-year results, the company cut its full-year cash flow guidance by 4 percent, blaming rising energy costs.
It is also losing business in Germany, Italy and Spain, with organic revenue in all those countries falling year over year in the latest quarter.
These problems caused the previous CEO, Nick Read, to lose his job last year.
It also scared off activist investor Cevian, who lost patience after believing Vodafone was undervalued.
Cevian disposed of its remaining stake earlier this year, having built it through 2021.
The hope with Vodafone is that it will be able to shed some of its assets and consolidate in its most profitable markets. It has already sold its Hungarian business and formed a joint venture for its Vantage Towers business.
Liberty Global is betting on a return on investment
New CEO Margherita Della Valle said in early February that changes were already underway. “We have already taken steps, including simplifying our structure to give local markets full autonomy and responsibility to make the best business decisions for their customers,” she said.
The former CFO is also continuing with a €1 billion savings plan launched by Read.
U.S.-based Liberty Global “expects the capital used to fund this investment to be replenished by the sale of certain non-core assets over time.” It is not considering a full offer for the business, according to its statement.
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