Vodafone confirms early asset exchange talks with Liberty Global after merger speculation

Telecom provider Vodafone Group confirmed it has entered early talks with Liberty Global about exchanging parts of their businesses, but underlined that it was not preparing a merger.

In a press release after business publications speculated about a possible £100bn ($153.1bn, €136bn) global telecoms giant merger, Vodafone said there is no certainty about which assets would be exchanged, nor has the deal been confirmed by either of the two parties.

Vodafone's share price fell by 2.09% during morning trading (9.30am), after the announcement of the deal, which would largely be focused on the companies' Europe division.

Cable provider Liberty Group, which was born from a merger between Liberty Media and UnitedGlobalCom, has already acquired cable provider Ziggo in the Netherlands and Virgin Media in the UK over the last years. The Netherlands, Germany and the UK will be the main areas affected by the deal.

Two people involved with the talks told Bloomberg that the transaction was very complex, which was one of the reasons no deal was reached yet. They added that the two companies could not agree on certain leadership positions and the new role of Liberty Group chairman, John Malone, who has an estimated net worth of €8.3bn, also formed an obstacle.

Augustin Eden, researcher at Accendo Markets, hinted that the asset exchange talks might not be the last one for the companies.

"One has to wonder whether this is somewhat of a warm-up act for a heightened display of affection between the ... world's second largest mobile operator and Europe's biggest cable company," Ede said.

"A sure-fire way to offer 'all in one' services effectively is to have everything in one place, but we wouldn't want to unsettle the markets with a shock announcement now, would we?"

A severely competitive telecom market has fuelled several mergers, acquisitions and other deals over the last months to help the companies maintain profit.

The media speculation about a deal between the companies rose when Malone 'blew his cover' when he hinted to an acquisition to Bloomberg on 19 May: "Is there a great fit in Germany? Absolutely. Is there a great fit in the U.K.? Absolutely. Is there a great fit in Holland? Absolutely. There's the promise of creating enormous shareholder value if we could work it out."