Vodafone is bidding to buy German cable company Kabel Deutschland for €7.7 billion (£6.6 billion) which will bring Vodafone’s revenues in the country to €11.5 billion (£9.8 billion).
The deal with Germany’s largest cable, telephony and broadband provide will strengthen Vodafone’s fixed line proposition in Germany and bring Vodafone Germany a total of 32.4 million mobile customers, 5 million broadband customers and 7.6 million TV customers.
In a statement Vodafone said the deal will ‘accelerate the growth in Vodafone’s and Kabel Deutschland’s broadband, telephony and TV business by leveraging Vodafone’s leading brand and extensive distribution and by cross-selling to each company’s customer base.’
Kabel Deutschland CEO Dr Adrian von Hammerstein said: ‘Kabel Deutschland and Vodafone are an ideal fit. Together, we have the opportunity to become Germany’s leading telecommunications and television provider and to create what for the German market is a unique, winning combination of fixed line and mobile communications.’
Kester Mann, senior analyst at CCS Insight, said Vodafone’s move is 'both offensive and defensive' and represents Vodafone’s wider strategy to focus on offering triple and quadruple play services.
He said: ‘Not only will it allow Vodafone to offer cable and TV services to mobile customers in its biggest European market, but it will also help defend its position from the ambitions of Liberty Global, Deutsche Telekom and Kabel Deutschland itself. The move reflects the severity of the threat from cable providers offering faster and lower-cost services.
‘Vodafone’s ambition represents part of a wider group strategy to focus more on offering triple and quadruple play services. This is particularly important given its limited fixed-line position in Europe. Such combined offers should enable operators to keep customers for a longer period of time as they more tightly ‘lock them in’ to a single provider.’
Warwick Business School assistant professor of strategy Ronald Klingebiel said a multi-play ambitions was only part of Vodafone's strategy.
'In Germany, Vodafone has not only launched LTE, a fourth generation mobile standard that allows for fast mobile TV, it has also started providing IPTV services, making use of Deutsche Telekom’s fixed line backbone.
“That particular network backbone is running at capacity and Deutsche Telekom is struggling to upgrade its network with vectoring technology, something that will increase its control over competitive data traffic.
“This may have convinced the Vodafone leadership to buy into Kabel Deutschland, a high-capacity cable-network provider, whom they had already approached at other times without concluding a deal.
“A deal with Kabel Deutschland would add to Vodafone's high speed network capacity in Germany and would also allow the company to move more seriously beyond mobile operations.”