Liberty Global and Vodafone Group have agreed to merge their operating businesses in the Netherlands to form a 50:50 joint venture. The joint venture will operate under both the Vodafone and Ziggo brands to create a nationwide integrated communications provider.
The new venture will combine Ziggo’s Horizon TV product suite, 200 Mbps nationwide broadband internet, and large Wi-Fi network, together with Vodafone’s 4G mobile propositions. Dutch consumers will enjoy, the companies claimed, a high-quality customer experience with superior connectivity and entertainment both in and outside the home.
The parties have agreed to provide a suite of services to the JV post completion. These services principally comprise IT and technology-related services, procurement, brand management and other support services. The annual charges to the JV will depend on the actual level of services required by the JV.
Vodafone Group Chief Executive, Vittorio Colao, said: “The combination of Vodafone’s mobile business with Ziggo’s broadband and TV business creates a strong and competitive integrated communications player, which will invest in digital infrastructure, entertainment services and productivity applications for Dutch consumer, business, and public sector customers. This transaction marks a continuation of Vodafone’s market-by-market convergence strategy and we look forward to partnering with Liberty Global to create a fully integrated provider in one of our core European markets.”
Mike Fries, Chief Executive Officer of Liberty Global, said: “Throughout Europe, Liberty is capitalising on the rising demand for lightning-fast broadband speeds, the coolest digital TV platforms and apps, and seamless 4G wireless connectivity. Soon, both Ziggo and Vodafone customers in the Netherlands will be at the forefront of this new world. We look forward to working together to develop cutting-edge converged services for the Dutch market.”
The total cost, capital expenditure and revenue synergies of the deal have an estimated net value of approximately €3.5 billion after integration costs. These include run-rate savings of €280 million on an annual basis by the fifth full year post closing, equivalent to a net present value of approximately €2.5 billion after integration costs.
Based upon the enterprise value of each business, and after deducting Ziggo’s €7.3 billion of net debt, Vodafone will make a cash payment to Liberty Global of €1 billion to equalise ownership in the joint venture. Vodafone Netherlands will be contributed on a debt and cash free basis.
The new joint venture will need further financial leverage. Accordingly, additional financing is expected to be raised by the joint venture in the future to reach target leverage. Proceeds from the financing will be distributed equally between Vodafone and Liberty Global.
