1005 Wednesday 12 December 2018

Questions have been raised over the merger of Vodafone and Liberty Global after EU antitrust regulators announced that they will launch a full scale investigation into the £17bn deal. In a press release issued last night, regulators were concerned that it would reduce competition for mobile and fixed telecoms in Germany as well as shutting out rivals in the Czech Republic.

The Vodafone Liberty deal was forged in order to compete against German firm Deutsche Telekom to provide mobile, fixed lines and internet service provisions within Germany and within other eastern European territories such as the Czech Republic, Romania and Hungary. It is also thought that by establishing themselves within the German market, this will place them in a dominant position to establish a 5G network as it rolls out in 2019 and beyond. Huawei is seen as a strong competitor for the 5G auction in Germany as it was revealed recently that the government would not be blocking the Chinese firm despite a number of countries forbidding them from operating amidst spying fears due to their strong ties with the Chinese government.

The antitrust case was opened by the EU regulators after concerns were raised by Telefonica Deutschland and a final decision will be reached by 2nd May. Vodafone have the right to extend the deadline should it offer concessions, however they remain confident that they will gain full EU approval by mid-2019.

 The Liberty Global deal is one of many that Vodafone made in 2018 with other deals taking place in India and Australia too. In India, Vodafone sought to fend off local rivals Reliance Jio and Bharti Airtel and in Australia, the merger with TPG Telecom sees them as a leading mobile provider. All of the deal form part of an overhaul by CEO Nick Reed that includes the issuance of hybrid bonds and the possible sale of signal masts to create extra cashflow for the company.

In the past month, Vodafone have received Buy recommendations from UBS and Deutsche Bank, Overweight from JP Morgan and Barclays as well as an Outperform from Credit Suisse with target prices ranging between 220.00 and 265.00 all well above its current valuation of 161.74.

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