Vodafone shares gain as UBS speculates about possible Liberty Global deal

Shares in telecoms giant Vodafone (VOD) were on the rise on Tuesday after UBS highlighted the possibility of a bid from US cable operator Liberty Global (LBTY).

The Swiss bank maintained a 'buy' rating and 265p target price on the UK-listed stock, saying that LBTY may be revisiting its strategy.

Recent reports suggest that Telenet (TNET), owned mainly by LBTY, is in advanced talks to buy mobile operator BASE as its mobile virtual network operator (MVNO) agreement with Mobistar expires in 2017.

UBS said: "LBTY has previously stated that it would adopt a capital light approach on mobile and focus on MVNO deals and utilising its WiFi network for mobile data offload rather than owning mobile infrastructure. However, with ongoing mobile consolidation happening across Europe and greater discipline by the mobile operators in offering 4G MVNO deals, this reported deal suggests potentially LBTY may be re-visiting its strategy."

The bank pointed out that there is a growing take-up of "converged services" - mobile, fixed-line and pay-TV combined - across Europe.

Developments in the UK - BT's recent £12.5bn acquisition of mobile operator EE - and potentially in Begium through a TNET-BASE deal could suggest that mobile assets are more valuable than investors currently expect.

"Other scenarios are equally possible, & that if any deal between VOD/LBTY were to occur it could be a merger of equals or LBTY acquiring VOD, rather than VOD acquiring LBTY," UBS said.

Nevertheless, regardless of a hypothetical deal, UBS said that VOD's stock is still cheap and fundamentals at the business are improving.

The shares were up 1.2% at 224.95p by 10:12.