Shares in cable company Kabel Deutschland have soared after confirmation of a Vodafone bid (release). In February Reuters reported that Vodafone was considering an £8.5bn bid for the firm.
Vodafone Group Plc notes the recent speculation regarding a potential offer for Kabel Deutschland Holding AG ("KD") and confirms that it has made a preliminary approach to KD regarding a possible offer for the company. There is no certainty that any offer will ultimately be made nor as to the terms on which any such offer might be made.
Interest had been muted after Vodafone agreed a deal to provide pay per view TV to German customers with Deutsche Telekom AG last month. Vodafone shares are trading over five per cent lower, but the firm also went ex dividend today.
Espírito Santo Investment Bank:
Our analysis of this situation determined that there would be significant synergies available to Vodafone from migrating a portion of its DSL customer base on to Kabel Deutschland’s cable infrastructure, potentially worth as much as €16 per Kabel Deutschland share. Vodafone’s recent agreement with Deutsche Telekom for VDSL access does not necessarily preclude an acquisition of Kabel Deutschland. Vodafone would still require VDSL access outside Kabel Deutschland’s footprint even if it were to proceed with a deal.
There is another side to this; that triple play operators are increasingly taking share in Mobile whereas mobile operators including Vodafone have failed to win significant share in the triple play segment. We believe it likely that Kabel Deutschland will ramp up its mobile offering over the next few years and see this as a significant risk to the German pure play mobile operators. United Internet has already embarked on this strategy in Germany and over the last year has increased the number of mobile customers as a proportion of its fixed customer base from 28% to 47%. Kabel Deutschland does therefore not just represent an opportunity for Vodafone to extract synergies but also to better defend its core business.