Liberty Global and Vodafone complete Dutch JV

vodafone-village-2016Liberty Global and Vodafone have completed the creation of their Dutch joint venture, establishing a converged fixed and mobile communications operator that can compete more effectively with KPN.

Liberty Global said that the 50:50 JV, combining its Dutch unit Ziggo’s fibre-rich fixed-line network with Vodafone’s mobile operations would create “a stronger converged competitor” in the Dutch market and deliver significant benefits to consumers.

The new company, VodafoneZiggo, has combined revenues of over €4 billion and a total of 15 million revenue-generating units across the country. In the year to September, Ziggo generated sales of €2.5 billion and EBITDA of €1.3 billion, compared with Vodafone Netherlands’ €1.8 billion revenue and €0.6 billion EBITDA.

The JV has four million video, 3.1 million broadband, 2.5 million fixed phone and 5.2 million mobile customers.

The new company will continue to use both Ziggo and Vodafone brands

Following the recapitalisation of the JV, Liberty Global will receive €2.2 billion and Vodafone will receive €0.6 billion in cash payments post-closing.

Following the December sale of Vodafone’s fixed consumer business, Vodafone Thuis to T-Mobile Netherlands – a condition for approval of the deal – the net present value of total synergies for the deal remains at around €3.5 billion, according to Liberty Global.

While the Vodafone Thuis sale reduces the cost and capex savings targeted for 2021, the sale improved the cash-flow to the JV and pushed down integration costs, the pair said.

Liberty Global and Vodafone have however agreed to increase the scope of services to be provided by both parent companies to the JV, leading to an increase on annual shareholders to the JV from the previously estimated €182 million for 2015 to €211 million for 2017.

The JV was approved by the European Commission in August after Vodafone said it would sell off its fixed-line business in the country, allaying concerns that the agreement could adversely affect competition in the market for multi-play services. The EC rejected a move by the Dutch regulator to have the deal referred back to it at the same time.

“This joint venture is great news for Dutch consumers and businesses. VodafoneZiggo will be the most innovative provider of converged communications services in the Netherlands with a full suite of market-leading TV, broadband, fixed-line and mobile products on day one of the JV. We are also excited for our shareholders. This is a highly accretive transaction with significant synergies and a predictable dividend stream. When including over €500 million of cash generated and up-streamed since the announcement of the deal back in February, total proceeds to Liberty will exceed €2.7 billion. We look forward to deploying that capital to drive long-term growth and investor returns,” said Mike Fries, CEO of Liberty Global.

“Today marks the creation of a strong integrated communications provider in the Netherlands, combining the complementary skills and experience of Vodafone and Liberty to bring a range of benefits to consumers, enterprises and the public sector. The merged operation will be a stronger competitor in the Netherlands – one of our core European markets – and is a further example of Vodafone’s ability to create value for its customers and shareholders through an effective market-by-market convergence strategy,” said Vittorio Colao, CEO of Vodafone.

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