Analyst view: Vodafone to takeover Kabel

Vodafone has been given the go-ahead to launch a takeover of Kabel Deutschland, which will give it access to 5.0 million broadband and 7.6 million direct TV in Germany.

Emeka Obiodu, principal analyst in Ovum’s Industry, Communications & Broadband practice, provides the following view:

“This will instantly make Vodafone the largest pay-TV provider in the country and the second largest fixed broadband provider. Vodafone is already the second largest mobile telco in Germany with 32.4 million customers.

“There are three key insights from this. The first is that a successful deal will be Vodafone’s single biggest M&A deal since its 2007 deal to enter into India. Given how the Indian deal was supposed to reflect a pivot into emerging markets, the deal in Germany is confirmation that Vodafone’s domestic European market is sickly and requires a good dose of medicine to jolt it back to life.

“The second insight is that the precarious situation of Europe’s telcos follows mostly from their exposure to mobile telecoms where the market is now saturated and prices have been on a steady downward trend. Ovum expects mobile telecoms revenues in Germany to fall by a compound annual growth rate of 1% between 2013 and 2018. In fact, Ovum calculates that mobile revenues in Germany will only be about 87% of revenues in France. Yet, Germany will have 164% of the total number of mobile connections in France by end of 2013. And so by adding  Kabel Deutschland’s fixed broadband and pay-TV customers, Vodafone is hoping to tap into other sources of additional revenue in the market. Ovum expects revenues from the cable broadband market in Germany to grow by a compound annual growth rate of 4% between 2013 and 2018.

“The third insight is how this deal demonstrates the pragmatism of Vodafone. Whereas Vodafone was regarded as a mobile telecoms company in the past, its quest for survival in Europe means it is prepared to jettison its ideological purity. Corporate strategy is emergent so this is not really a big deal. However, the implication is that if Vodafone becomes Germany’s largest pay-TV provider, why would it not want to do the same in the UK, Spain, Italy or Netherlands? Watch this space.”

—ENDS—

NOTES TO EDITORS

For further comment from an Ovum analyst, please contact Claire Booty in the Ovum press office on +44 (0) 20 7017 7916, or email: Claire.Booty@Ovum.com

 

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