Vodafone's on-off talks with Liberty Global back to 'early stages' again

Vodafone confirmed it was in talks with Liberty Global about potentially buying some of the Virgin Media owner's continental European assets.

Vodafone said discussions were still in "early stages" regarding the potential acquisition of "certain overlapping continental European assets" owned by Liberty.

The possibility of Vodafone and New York-listed cable giant Liberty merging has been a long-running City topic. Late last year there were reports Liberty was exploring a sale of its Swiss and Austrian arms as a way of clearing the way for a merger.

In 2015 the pair got together and talked over the course of several months about possibly combining their mobile and cable networks in the UK, Germany and possibly other European markets through asset swaps, a merger or a takeover, though it all came to nought.

In 2016 Vodafone boss Vittorio Colao hooked up again with Liberty's boss, 'cable cowboy' John Malone, to discuss the possible creation of a joint venture in the Netherlands but to no end.

In 2017 Colao sparked further City chatter when he said the two telcos represented the only “serious” challenges in Europe to fixed-line incumbents such as Deutsche Telekom and BT.

Earlier this week, Exane BNP Paribas said a UK and German asset swap would lead to 28p of value creation for Vodafone. "Moreover, were data usage to increase at a rate well in excess of expectations, and the need for mobility services to ramp, consensus estimates would likely require upgrading."

The FTSE 100 group, in a report 10 minutes before market close on Friday said there was no certainty that any transaction will be agreed, nor as to the terms, timing or form of any transaction. Followers of the Vodafone-Liberty epic will not need telling.

Shares in Vodafone spiked up 2.38% just before the close to 219.5p, still below where they started the week after third-quarter results disappointed.

The telecoms giant revealed a 3.6% drop in revenue for the quarter, which was attributed to the sale of its Dutch unit and tough competition in India, though growth in organic service revenue of 1.1% in the quarter was weaker than the 1.3% rate in the second quarter.

Management however remained confident the group was on track to meet forecasts for annual profit after trading in line with expectations for the third quarter, with chief executive Vittorio Colao pointing to continued strong growth in data usage, 100m 4G customers, and its best ever quarter for customer growth in high speed broadband in Europe.

Exane's note on UK telcos examined looked at whether Vodafone might buy TalkTalk as a means of creating a potentially "higher synergy in any deal with Liberty Global" and "put further pressure on Liberty Global to do a deal at acceptable terms".