Liberty Global swipes ‘opportunistic’ £1.2bn stake in Vodafone


The joint owner of Virgin Media O2 has purchased a 5% stake in its UK rival, arguing the company’s current share price does not represent its long term value

This week, the ongoing turmoil at Vodafone continues to open doors for investors, with US firm Liberty Global announcing their purchase of an almost 5% stake in the business for £1.2 billion.

Liberty, which is chaired by fabled “cable cowboy” John Malone and owns 50% of Vodafone’s UK rival, Virgin Media O2, said the purchase was ‘opportunistic’ in nature.

“We believe, like many others, that Vodafone’s current share price does not reflect the underlying long-term value of their operating businesses, or their announced consolidation and infrastructure opportunities,” explained Liberty Global CEO Mike Fries in a statement.

“The stock’s cheap — it’s an opportunistic and financial investment,” he added in a comment to the Financial Times.

Further motivation for the acquisition is reportedly Vodafone’s latent potential for value generation, with Fries specifically referencing the company’s potential merger with CK Hutchison’s Three UK. A tie-up between the two companies has been rumoured for many years, with both having repeatedly argued that the UK mobile market is overcrowded with four major players.

Negotiations between Three and Vodafone were acknowledged back in October and are still ongoing today.

Liberty also made clear that this investment was not the first step in a takeover attempt and that the company would not seek representation on Vodafone’s board.

Facing stiff competition in its most crucial markets, including Spain, Germany, and Italy, Vodafone has been struggling to find growth in recent years. Under the leadership of CEO Nick Read, the company had positioned consolidation in various European markets as the panacea to its financial woes; however, deals have been few and far between.

The company’s share price has tumbled by around 40% during Read’s four-year tenure, putting the company under increasing pressure from stakeholders – including activist investors like Cevian Capital – to undergo major restructuring.

At the end of last year, Read resigned from his position as CEO, handing over the reins to the company’s finance head, Margherita Della Valle, on an interim basis.

The search for a permanent replacement CEO is ongoing.

In the meantime, Della Valle is continuing the work of her predecessor in seeking focussing on the company’s key markets and pursuing operational simplification.

Vodafone currently has plans to generate €1 billion in cost-savings by 2026, some of which it admitted would be generated through job cuts. At the start of the year, Vodafone said it was cutting hundreds of jobs – primarily from its London office – as part of these cost-saving efforts.

Given the magnitude of the internal turmoil at Vodafone right now, coupled with the company’s latent potential, it is clear to see why the company’s shares could be enticing for investors.

Indeed, it should be noted that Liberty Global is not the only company to be taking advantage of Vodafone’s vulnerable financial position. Back in September, billionaire Xavier Niel, owner of French telecoms group Iliad, purchased a 2.5% stake in Vodafone for an undisclosed sum, noting opportunities to streamline the business and spin off its infrastructure assets.

Similarly, United Arab Emirates telecoms operator e& (previously Etisalat) has also quietly grown its stake in Vodafone to around 13%.

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