Vodafone and Liberty Global have reached an agreement on a 50-50 joint venture in the Netherlands. Vodafone will pay Liberty Global EUR 1 billion cash as part of the deal and contribute its Dutch mobile operator on a debt- and cash-free basis to the venture, alongside Liberty’s cable operator Ziggo. Pending regulatory approval, the companies expect to close the deal by the end of 2016.
The merger is expected to lead to synergies of EUR 3.5 billion, including EUR 280 million in annual cost savings from the fifth year. Integration costs are estimated at EUR 350 million over three years. The joint venture will target a leverage of 4.5-5.0 times EBITDA, based on Ziggo’s current EUR 7.3 billion in debt and expected future financing. Both parent companies will provide services to the new joint venture, including IT, procurement and brand management.
The merger will create a completely integrated fixed and mobile player, competing alongside Dutch incumbent KPN, with 4.2 million TV customers, 3.2 million broadband subscribers and 5.3 million mobile customers. According to figures from the Telecompaper Consumer Panel, Ziggo and Vodafone already have significant overlap in their customer bases. In Q3 2015, 46 percent of Vodafone mobile customers subscribed to fixed broadband from Ziggo and 52 percent used TV services from Ziggo.
The competitive situation will change little in terms of market shares, as Ziggo’s MVNO has only a small presence in the mobile market and Vodafone also has few fixed customers on the Dutch market. Vodafone’s customers will help to strengthen Ziggo’s lead on the broadband and TV markets, but the combination will remain number two on the mobile market, behind KPN.
Vodafone and Liberty Global will each contribute three members to the joint venture’s supervisory board, alongside two members named by the works council. Each parent company will hold the position of chairman for 12 months. Management at the new company will be named later. Both companies will also have the right to initiate an initial public offering of the joint venture, and they will have the right to sell their stakes to third parties from the fourth anniversary of the joint venture.