Consolidation is the name of the game in the telecoms sector and Liberty Global is taking a £1.2 billion bet that Vodafone is going to be an important cog in the system.
By acquiring nearly a 5% stake Liberty Global is essentially getting its foot in the door should any new deals start to emerge. The company says the stake is only for investment purposes, but it’s got form in seeking optionality for potential deals.
AJ Bell’s Russ Mould said: “Liberty Global has been quietly sitting on a 9.9% stake in ITV for some time, while it also has positions in various telecoms and media groups including Virgin Media O2 and All3Media.
“As a standalone business, Vodafone has struggle to generate any notable sales and earnings growth in recent years, and its share price performance has been truly miserable. Slowly, other players are planting their flags by investing in Vodafone with the market expectation that they will try and extract some value from the business.
“Liberty Global has already done deals with Vodafone in the past, merging the two companies’ Dutch operations and selling some of its European interests to the UK business. It probably has a few ideas up its sleeve and realised it could have more influence by being a shareholder than sitting back and letting others get a seat at the table.
“Middle Eastern group e& already has a 13% stake in Vodafone and French investor Xavier Niel owns 2.5% of the business, so Liberty Global must join the queue of people eager to ‘have a chat’ about where Vodafone goes next.
“The company is certainly in a fragile place, with chief executive Nick Read having recently left the business. Its share price is down more than 50% over the past five years as the telecoms group has waded through treacle to try and make progress.”