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Vodafone and Liberty Global have agreed to merge their Dutch operating businesses into a 50/50 joint venture that will operate under the Vodafone and Ziggo brands. The combination creates an integrated communications provider designed to deliver converged connectivity and entertainment services across the Netherlands.
The joint venture will serve more than 15 million revenue-generating units, including approximately 4.2 million video customers, 3.2 million high-speed broadband connections, 2.6 million fixed-line telephony subscribers and 5.3 million mobile users. By combining Vodafone’s mobile network and Ziggo’s fixed-line infrastructure and entertainment offerings, the new company aims to provide seamless services both inside and outside the home.
Ziggo’s portfolio brings nationwide broadband with speeds up to 200 Mbps, a comprehensive Wi-Fi network and the Horizon TV platform, while Vodafone contributes extensive 4G mobile capabilities and experience in mobile services. Together, the companies intend to offer consumers improved bundled products, enhanced network coverage, unified customer experience and a broader entertainment lineup.
From a financial standpoint, after accounting for Ziggo’s net debt of €7.3 billion, Vodafone will pay €1 billion in cash to Liberty Global to equalize ownership in the joint venture. This payment reflects a €2 billion difference in the equity value between the two businesses prior to the transaction.
The companies anticipate meaningful cost and capital expenditure synergies from the integration. They estimate run-rate savings and capex efficiencies of about €280 million per year by the fifth full year after closing, which corresponds to a net present value in the region of €2.5 billion after integration costs. These efficiencies are expected to come from network consolidation, streamlined operations, combined procurement and reduced overlap in commercial functions.
The transaction remains subject to regulatory approvals and consultation with employee Works Councils, and is expected to close toward the end of 2016. Once completed, the joint venture will position Vodafone and Ziggo to compete more effectively in the Dutch market by offering a wider range of bundled services, improved network performance and an integrated entertainment and connectivity proposition for households and mobile customers.