Liberty Global Plans Netherlands Joint Venture With Vodafone

The board of the joint venture is expected to be comprised of three representatives from each of Liberty Global and Vodafone.

Vodafone and Liberty Global had resumed talks about possible asset swaps in Europe since the start of the year, according to people with knowledge of the matter earlier this month.

Vodafone pointed to cost and capex synergies with run-rate savings of 280m on an annual basis by the fifth full year after the deal closes, equivalent to a net present value of around 2.5bn after integration costs.

The UK-based operator will pay Liberty around £770 million to “equalise ownership in the joint venture”, it said in a statement. The JV will operate under both the Vodafone and Ziggo brands and will create a nationwide integrated communications provider with over 15 million revenue generating units, of which 4.2 million are video, 3.2 million are high-speed broadband, 2.6 million are fixed-line telephony and 5.3 million are mobile.

Shares in Vodafone were down 0.5 percent at 208.5 pence by 1035 GMT.

United Kingdom phone network operator Vodafone Plc and John Malone’s cable company Liberty Global Plc agreed on Monday to combine their operations in the Netherlands for a better footing in the local market.

New joint venture will target leverage of 4.5-5.0x covenant EBITDA.

The merger still has to be approved by the relevant authorities and the two companies expect to complete the deal by the end of 2016. The company did not reveal their plans for job cut. A Vodafone representative declined to comment beyond the statement. By merging the two companies can offer both mobile and internet/television services, using only their own infrastructure, thereby being able to compete with companies like KPN. In the Netherlands, the company’s revenue rose 19.6 percent to $672.6 million from the prior-year quarter.

Cooperation gives Vodafone an opportunity to gain pay-TV and broadband businesses as it seeks to reduce its reliance on a wireless business that has suffered from a fierce price war in Europe. Deutsche Telekom is considering the sale of its Dutch operations in a move that could help the German carrier reduce debt, people familiar with the matter said in October.

France’s biggest telecoms operator Orange is also in talks over Bouygues Telecom, and Orange said on Tuesday that those talks were still ongoing and would “require at least several weeks before any decision is taken”.