Vodafone and Liberty Global JV credit positive, says Moody's

Vodafone’s joint venture with Liberty Global in the Netherlands is credit positive for the FTSE 100 company and Ziggo, Moody’s Investors Service said.

Last week, the companies announced that Vodafone will pay Liberty €1bn to create a 50:50 JV that will merge the London-listed telecoms operator’s Netherlands business with Liberty’s Ziggo brand.

Vodafone pointed to cost and capex synergies with run-rate savings of €280m on an annual basis by the fifth full year after the deal closes, equivalent to a net present value of around €2.5bn after integration costs.

Moody’s said these synergies were “at the higher end of the range when compared with other similar fixed-to-mobile deals in Europe”.

“The creation of a second integrated player will increase competitive pressure on smaller mobile-centric players in the Dutch market,” it added.

The ratings agency said Vodafone is trading full ownership of a mobile-only asset and Ziggo its ownership of a cable asset for a partial ownership in a more competitive converged mobile/cable asset.

“The joint venture will be able to offer so-called quadruple-play services, including fixed telephony, mobile, broadband and pay TV. Such an offer should boost subscriber revenue owing to cross-selling and up-selling opportunities, and reduce churn by increasing customer loyalty.”

In addition, it said Vodafone will also secure the much-needed fibre backhaul access for its base stations, which is crucial to deliver faster 4G speeds.

At 1415 GMT, Vodafone shares were up 1.4% to 216p.