Vodafone offers €7.7 billion for Kabel Deutschland in fixed network push

The operator hopes to take advantage of Kabel Deutschland's high-speed broadband and TV offerings

Vodafone plans to acquire Germany's largest cable operator, Kabel Deutschland, for €7.7 billion (US$10.1 billion) as it looks to become more competitive by combining mobile, fixed broadband and TV subscriptions, it said Monday.

By taking advantage of Kabel Deutschland's high-speed broadband and TV capabilities, the acquisition, if successful, will provide Vodafone with the ability to offer unified communications services and cross-sell to consumers and businesses in Germany, according to Vodafone. It would leave the U.K. operator with 32.4 million mobile subscribers, 5.0 million broadband subscribers and 7.6 million direct TV subscribers in Germany, the company said on Monday.

Vodafone said the acquisition will also allow it to cut costs. It plans to migrate its existing fixed-line DSL users to Kabel Deutschland's cable network where possible, generating savings from closing down DSL central offices, reduced maintenance costs and removing the need to pay unbundled local loop and bitstream fees.

Shrinking revenues from voice and messaging are forcing mobile operators to look for new revenue streams. For Vodafone, fixed networks have become a large part its efforts to grow in the challenging European market. The company's results for the year to March 31 showed that fixed line revenue had grown to £4.7 billion ($7.1 billion) from about £3.6 billion a year earlier.

The acquisition bid didn't surprise analysts. Local reports have speculated that Vodafone would strengthen its fixed-line position by either bidding for Kabel Deutschland or striking a closer wholesale agreement with Deutsche Telekom, CCS Insight wrote in a recent research note. Given that Vodafone already has a significant fixed-line position in Germany, having taken full-ownership of Arcor in 2008, either move would reflect the severity of the threat from cable providers offering faster and lower-cost services, CCS Insight said at the time.

As part of Monday's announcement, Kabel Deutschland has provided Vodafone with a matching right in the event of a competing offer and agreed to cooperate with Vodafone in relation to securing merger control approvals, Vodafone said.

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