Liberty Global, the US group chaired by “cable cowboy” John Malone, has bought a nearly 5 per cent stake in Vodafone, as it bets that forthcoming deals and restructuring will revive the beleaguered UK telecoms group.
Denver-based Liberty Global has acquired 1.3bn shares, representing 4.92 per cent of share capital, financed mostly through derivatives, and requiring only £225mn in equity funding from the group. The company said it would not seek a board seat and confirmed that it was not considering an offer for Vodafone.
“The stock’s cheap — it’s an opportunistic and financial investment,” Liberty Global’s chief executive Mike Fries told the Financial Times, adding that his company had $3.5bn in cash to “put to work”.
Fries said Vodafone had some “interesting catalysts” for potential value creation, including a proposed merger with CK Hutchison’s British business Three UK, for which talks are still ongoing.
“We only [operate in] one market with four mobile players — everyone else has consolidated to three — Ireland, Belgium, Holland, Switzerland. The UK is an anomaly,” he said. “We’re patient. We don’t know that any one or two things will happen overnight but we understand the publicly disclosed strategy and we think it’s a good one.”
Liberty Global will join a star-studded roster of telecoms names that have built stakes in the struggling European company which has lost more than 55 per cent of its value over the past five years.
In September, French billionaire Xavier Niel announced that he had bought a 2.5 per cent stake in Vodafone via his investment vehicle Atlas Investissement. He wants Vodafone to streamline its business, drive down debt and improve cash generation. Meanwhile, United Arab Emirates telecoms operator e& has built a stake totalling 13 per cent.
Liberty Global has been one of the most active dealmakers in European telecoms over the past five years, having sold, bought and merged various operators. In 2021, it closed a £31bn agreement to merge its Virgin Media business with Telefónica’s O2 and also sold its German and some eastern European assets for €18.5bn in 2018.
Vodafone has had a particularly challenging year after the FTSE 100 group came under pressure from a number of investors to simplify its sprawling business, shed poorly performing units and decentralise its global operations.
Europe’s biggest activist investor Cevian Capital bought a stake whose size was undisclosed and angled for a shake-up but sold out entirely after deciding change was unlikely to happen quickly.
Former chief executive Nick Read, under whose tenure Vodafone lost more than 40 per cent of its value, stepped down at the end of last year. He has been replaced on an interim basis by Margherita Della Valle, Vodafone’s chief financial officer.
Fries said he believed Vodafone had suffered from the same structural difficulties as other telecoms groups across Europe, including overly fragmented markets and regulators’ resistance to allow consolidation, but argued that it appeared that the environment was changing.
“Regulators have realised that investments should come with reasonable opportunities to make a return, they’ve started to support the industry more than in the past,” he said.
Liberty Global has not held discussions with either e& or Niel about the stake-building, Fries said.