Vodafone and Liberty Global agree Dutch joint venture

Vodafone and Liberty Global have agreed to combine their operations in the Netherlands.

The London-listed telecoms operator will pay Liberty Global €1bn (£770m) to create a 50:50 joint venture that will merge Vodafone’s Netherlands business with Liberty’s Ziggo brand, creating a nationwide integrated communications provider with over 15m revenue generating units.

The companies said the merger will create a stronger fixed and mobile competitor in the Dutch market.

Vodafone’s group chief executive, Vittorio Colao, said: "The combination of Vodafone's leading mobile business with Ziggo's successful broadband and TV business creates a strong and competitive integrated communications player, which will invest in digital infrastructure, entertainment services and productivity applications for Dutch consumer, business and public sector customers.

“Together we will be a stronger competitor in the Netherlands, benefiting customers of both companies and the market as a whole. This transaction marks a continuation of Vodafone's market-by-market convergence strategy and we look forward to partnering with Liberty Global to create a fully integrated provider in one of our core European markets."

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 deal, which is subject to regulatory approvals, is expected to close around the end of this year.

The companies confirmed early this month that they were in talks about the possible creation of a JV that would incorporate their operating businesses in the Netherlands following press speculation they had resumed talks about possible asset swaps in Europe.

Nomura said this was a better deal for Liberty than Vodafone.

“The valuation gap is still material at a time when the growth rates of the two businesses are broadly aligned. This is likely to reflect the fact that Liberty had other options to buy a mobile network in the Netherlands and also the fact that mobile was about to get more competitive with the entry of Tele2,” it said.

The Japanese bank expects the scale of the valuation gap to be a disappointment for Vodafone shareholders, somewhat offsetting the value crystallisation through synergies.

At 1115 GMT, Vodafone shares were down 0.3% to 208.80p.