Liberty Global snaps up a 4.9% stake in Vodafone Group

Ray Le Maistre
By Ray Le Maistre

Feb 14, 2023

  • Liberty Global is the latest CSP to invest in Vodafone
  • The pan-European operator has acquired a near 5% stake
  • The two operators know each other well through their Dutch joint venture
  • Liberty Global is stressing that this is an investment opportunity, not the start of a takeover move

Liberty Global has become the latest network operator to capitalise on Vodafone Group’s depressed share price and take a stake in the telco, splashing out about £1.2bn on 1.335 billion shares in Vodafone, giving it a 4.92% stake

According to Liberty Global CEO Mike Fries, the move represents an “opportunistic and financial investment” and there are no plans to make a takeover offer for Vodafone or request a seat on the board. 

“We believe, like many others, that Vodafone’s current share price does not reflect the underlying long-term value of their operating businesses, or their announced consolidation and infrastructure opportunities,” noted Fries in Liberty Global’s statement about the stock purchase. 

Indeed, Liberty Global is not the only communications service provider that believes Vodafone, which is currently seeking a new CEO following the resignation of Nick Read at the end of 2022, is a good investment right now. Middle East telco giant e& recently increased its stake to 12%, while Iliad’s owner Xavier Niel holds a 2.5% stake in Vodafone via his Atlas Investissement investment vehicle. 

Vodafone’s share price gained 2% after the Liberty Global news was announced late on Monday, ending the day at 94 pence on the London Stock Exchange. And the share price gained another 3.4% to 97.2 pence in early trading on Tuesday, giving the operator a market value of just over £25bn. 

But that still leaves the share price almost 29% lower than a year ago, when Vodafone’s stock was worth almost 137 pence, and clearly Liberty Global believes the only way is up for the telco’s share price this year. “The investment by Liberty Global reflects Vodafone’s low share price, which has been in steady decline for several years,” Kester Mann, director of consumer and connectivity coverage at CCS Insight, told TelecomTV.

But like Xavier Niel and e&, Liberty Global clearly has faith in Vodafone, a company it already knows very well: One of Liberty Global’s various cable TV, mobile and fixed broadband operations across six European markets is a joint venture with Vodafone in The Netherlands (VodafoneZiggo). 

However, those assets also include a 50% share in UK operator Virgin Media O2, a major competitor to Vodafone UK, which makes its investment in Vodafone stock even more interesting (and appears to be one of the reasons why Liberty Global is stressing the move is purely an investment opportunity rather than a strategic move). 

But that stake in Virgin Media O2 also means Liberty Global has a very good knowledge of the dynamics of the UK market, and it seems Mike Fries might be confident that Vodafone will get the green light to acquire Three UK, a deal announced in October 2022 that would give it greater scale and would likely give the Vodafone share price a lift, noted CCS Insight’s Mann. 

The purchase of the stake “could be interpreted as a positive indicator for Vodafone’s planned merger with Three in the UK,” stated the analyst, who believes this investment might herald a new wave of deals in Europe by Liberty Global. He added that the telco has “been an active deal-maker in the European telecoms sector in recent times, including selling its operations in Germany, the Czech Republic, Hungary and Romania to Vodafone for €18bn in 2019.” 

And although the Vodafone investment appears opportunistic, “it also raises questions as to what will be the US company’s next move in Europe. One option could be to buy Vodafone out of its 50/50 Dutch joint venture, VodafoneZiggo. But CEO Mike Fries has also previously expressed interest in merging VodafoneZiggo with Belgian operator Telenet, a scenario that could become more attractive following recent positive comments from the European Union regarding pan-market consolidation,” added Mann – see What’s up with… EU M&A, capex contributions, Baidu and Google.

Certainly all immediate eyes will now be on the development of Vodafone’s engagement with Three UK and on the appointment of a new CEO for Vodafone Group. Nick Read was unable to satisfy investors with the pace of Vodafone’s M&A moves, and now that list of investors includes a company with first-hand knowledge and experience of European telecom consolidation. 

- Ray Le Maistre, Editorial Director, TelecomTV

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