Liberty Global shares fell slightly in early trading Monday after a strong rise on Friday after speculation that U.K. mobile giant Vodafone was again considering a takeover of the international cable giant headed by U.S. cable legend John Malone.
According to reports in Bloomberg News citing unnamed sources, Vodafone was holding “internal deliberations” about the possibility of making a run at Liberty Global. The report said no formal talks were being held between the parties and that valuation and regulatory issues remain. Spurring the decision was British Telecom’s proposal to purchase either Spanish telecom provider Telefonica’s O2 or EE, the wireless company jointly owned by Orange SA and Deutsche Telekom, giving the wireline communications giant a mobile foothold in Europe.
Liberty Global is the largest cable operator in Europe and has about 27 million subscribers across the continent and in Latin America.
Liberty Global shares fell $1.14 cents each (2.2%) in early trading Monday to $50.85 each, after a 7.4% increase ($3.60 each) to $51.99 per share on Nov. 28. Vodafone, which rose by about 2.5% on Nov. 28, was down about 2.4% (87 cents each) to $35.68 per share in early trading Dec. 1.
A Liberty Global takeover would be costly. The Denver-based cable company has a market capitalization of about $39 billion and $41 billion in debt.
The push by BT to establish a mobile footing apparently comes as Liberty Global itself is making moves to offer wireless service in the U.K.
Analysts are split between the obvious economic benefits of a Vodafone-Liberty combination with the potential regulatory pitfalls. In a note to clients, Elevation Partners LLC media analyst Stephen Sweeney wrote the rationale for both deals would be to create a facilities-based triple play offering for BT by giving it a wireless product beyond its current MVNO relationships and for Vodafone, adding more wireline and cable capabilities.
“Overall we would say both deals are possible and the industrial logic is solid, but it is too early to tell what the regulatory outlook for either would be or what the investor reaction would be since the valuation/structure on both remains on unknown,” Sweeney wrote.
This isn’t the first time that a deal between the two communications giants has been contemplated. Back in August 2013, speculation was high that Vodafone, which was in the process of selling its 45% stake in Verizon Wireless back to the mobile company for $130 billion, would use some of the proceeds for a Liberty Global tie-up. That deal never materialized and instead the wireless giant cut its debt and issued $82.5 billion to shareholders.
In June of that same year Liberty Global and Vodafone competed for German cable operator Kabel Deutschland, an asset that Vodafone eventually won with a $10 billion bid.
Vodafone has shown its appetite for European cable – in addition to Kabel Deutschland, the company purchased Spain’s largest cable operator Ono earlier this year for which Liberty Global also was a bidder. In October, Liberty Global said it would establish a tracking stock for its Latin American operations, which could make a Vodafone deal easier to execute.