The acquisition is further evidence that part of Vodafone's strategy, following its reteat from the US market, will be to provide quad-play services (fixed line telecoms, mobile, cable TV and broadband Internet access) to the well-heeled burghers of Germany.
Indeed, the deal is already done, with more than the legally required 75 per cent of Kabel Deutschland's shareholders having already voted to accept Vodafone's takeover offer of €87 a share plus a one-off €2.50 per share dividend payment.
Vodafone's winning bid went ahead despite hedge fund operators crashing-in to buy Kabel Deutschland shares in an effort to force up the Uk company's offer.
Vodafone is the biggest mobile service provider in Germany with 32 million customers. Now, as a result of the purchase of Kabel Deutschland, Vodafone will gain access to some 7.6 million cable TV subscribers. Kabel currently provides 32 free-to-air-channels, 100 digital channels and digital radio channels. The services are sold direct to householders but Kabel is particularly strong in providing services to the apartment blocks and housing corporations for the great number of Germans who live in flats.
Even though Vodafone has pledged to return 71 per cent of the payment for Verizon Wireless to its shareholders, the company will remain cash rich. Estimates are that it is sitting on a nice, soft cash cushion of at least £30 billion. Analysts believe the company will use some of this money to pay down debt and fund other mergers and acquisitions.
Vodafone has also announced that it will spend £6 billion between now and 2016 in upgrading its networks. The initiative, code-named Project Spring, will ensure that by 2017 Vodafone will be able to provide 4G coverage to 90 per cent of the population of Europe's five biggest markets.
The deal has to be approved by the European Commission, but that is regarded as being little more than a bureaucratic formality.
Post-Verizon Wireless, Vodafone's strategy will be to build new and upgrade aging networks to provide consumers with a bigger and better mobile experience than its rivals. Next on Vodafone's shopping list is expected to be the Italian broadband access provider Fastweb. Ultimately owned by Swisscom, Fastweb is Italy's third-biggest ISP and is currently valued at €2.9 billion.
Last year, Vodafone acquired Cable & Wireless Worldwide (and its 20,500 kilometres of fibre optic cables) for the knockdown price of just €1 billion- a real bargain.
Commenting on the purchase of Kabel Deutschland, IHS Electronics & Media Analyst, James Allison, said, "With the acceptance of Vodafone’s takeover of Kabel Deutschland, Vodafone strengthens its position in multiplay markets in Germany. The main advantage for Vodafone is that it now has a greater residential fixed-line network to market multiplay services to, with market share of 54.3 per cent in voice, 44.9 per cent in broadband, 32.3 per cent in mobile, and 7.6 per cent in pay-TV."
He added, "The deal gives Vodafone the ability to offer the first true quad-play offer in Germany, which would lock-in high revenue subscribers. The completion of the deal places pressure on the O2 Germany and E-Plus merger to go through, as the two smaller mobile operators face a stronger Vodafone".
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