UPDATE 1-Vodafone says Liberty Global tie-up talks ended

28 Sep 2015 | Author: | No comments yet »

European shares dip, VW loses ground.

LONDON — Vodafone ended talks about an exchange of assets with John Malone’s pay-TV giant Liberty Global, denying the wireless company a chance to fix its European business that’s been threatened by price wars. Talks to allow the world’s second largest mobile operator, Vodafone, to branch out into broadband and television have broken down without agreement, both sides have confirmed.Virgin Media Finance Plc, which was bought by billionaire John Malone’s Liberty Global in 2013, saw its 460 million euros ($515 million) of January 2025 bonds fall 2.9 cents to 92.8 cents on the euro, the lowest since they were issued earlier this year, according to data compiled by Bloomberg.Talks between Vodafone and Liberty Global about exchanging assets to better compete in Europe’s converging mobile, broadband and TV markets collapsed on Monday because they could not agree on the value of their businesses.London – European shares dipped lower on Monday, although Vodafone lagged after ending talks with Liberty Global and carmaker Volkswagen, which has been hit by an emissions data scandal, also declined.

The pan-European FTSEurofirst 300 index was down 0.1 percent, while the euro zone’s blue-chip Euro STOXX 50 index fell 0.3 percent, with both markets retreating after rising by around 3 percent on Friday. A deal would have allowed both Liberty and Vodafone to converge their resources so each may be better able compete in a European market increasingly leaning towards all-inclusive package offers.

Liberty Chairman John Malone, who saw the companies as a “great fit”, said earlier this month they were struggling to progress with the plan, telling Bloomberg that “conceptually there could be some real value created but realistically we haven’t been able to figure out a way to do that that’s mutually successful”. Vodafone, the world’s second-largest mobile-phone company, announced the termination of discussions Monday, almost four months after disclosing the talks. Virgin Media and Unitymedia are rated at least five levels below Newbury, England-based Vodafone. “The end of the talks is affecting the whole Liberty Global structure as investors expected some of these entities to become part of Vodafone,” said Andrew Wilmont, head of European high-yield investment at Neuberger Berman Group LLC in London, which oversees about $257 billion. “Vodafone is a very strong investment-grade issuer, which would have improved the credit profile of these companies a lot.” Shares of aluminum giant Alcoa (AA) surged more than 7% in the pre-market after the company announced it plans to split into two separate publicly-traded businesses. But Spain’s constitution does not allow any region to break away, so the prospect remains hypothetical. “Overall sentiment remains negative for now while there is much talk about a squeeze on earnings and lower economic growth in the months ahead,” said Peregrine & Black senior sales trader Markus Huber.

The telecoms industry is undergoing a period of merger deals after Britain’s biggest fixed-line (landline) and mobile phone operators, BT and EE, agreed to join forces in February. The companies have never specified which assets were being discussed, but bankers and industry analysts said in June the German and British markets would be the top of the agenda. The first of the two firms will focus on global primary products including aluminum and energy; while the second firm will be comprised of Alcoa’s engineered products and transportation and construction.

Volkswagen shares were among the worst performers in Europe, falling 3 percent after two German newspapers reported on Sunday that Volkswagen’s own staff and one of its suppliers warned years ago about software designed to thwart emissions tests. VW shares have fallen by more than 30 percent over the last week after the German company acknowledged installing software in diesel engines designed to hide their emissions of toxic gasses. After spending about $7 billion in the region, Royal Dutch Shell (RDSA) said it would halt its Artic exploration off the coast of Alaska after an unsuccessful drilling project failed to find enough oil. However, there were signs elsewhere that merger activity remained alive, with SABMiller shares rising 4.1 percent after the Sunday Times newspaper reported that Anheuser-Busch InBev SA could bid about $106 billion for SABMiller within days. “We don’t think that merger and acquisition activity will be derailed by the market volatility,” said Edouard Petitcollot, senior fund manager at Candriam Investors Group.

Vodafone is giving up an opportunity to gain pay-TV and broadband businesses in market such as the U.K. and Germany as it seeks to reduce its reliance on a wireless business that has suffered from a fierce price war in Europe. Thanks to the growing popularity of Universal Studio’s Harry Potter theme-park attractions, Comcast (CMCSA) said on Monday it will take a majority stake in Universal Studios Japan for a price tag of $1.5 billion. For Liberty Global, a deal with Vodafone would have deepened a shift in strategy at a media company that until recently has shied away from owning wireless networks. For now, the companies are forgoing what Malone once described as “enormous potential synergies.” Comparing Vodafone to “a big banana in the jar,” Malone said in an interview in May: “The question is: how do you get your hand out of the jar with the banana.” Without a deal, Vodafone Chief Executive Officer Vittorio Colao may choose to add TV and Internet services to his mobile networks in Europe.

As traders digested the flurry of corporate news ahead of the opening bell on Wall Street, they also looked ahead to macro events including several key economic data points, and three speeches from top Federal Reserve officials. On the economic front, personal income and spending data from the Commerce Department showed incomes rose 0.3% in August, compared to expectations for a 0.4% rise, while spending saw a 0.4% increase compared to forecasts for 0.3%. Verified email addresses: All users on Independent Media news sites are now required to have a verified email address before being allowed to comment on articles.

The combination of O2 and Three, local units of Telefonica SA and CK Hutchison Holdings Ltd., will create the country’s biggest mobile operator while BT Group Plc’s acquisition of EE will make it the largest “quadruple- play” service provider. “It’s good news that Vodafone is not sucked into a swap of assets — I was never convinced that there was real value for shareholders in that scenario,” said Paul Marsch, an analyst at Berenberg Bank in London. “We can never rule out a future deal, but for real value to be created it has to be a full-blown merger on a nil-premium basis where both sets of shareholders get upside from the significant synergies.” A deal between the companies would have reshaped Europe’s telecommunications and cable industries and also attracted antitrust scrutiny. Dudley added that he believes the economy is “doing pretty well,” and is moving back toward the Fed’s dual objectives of full employment and price stability. Chicago Fed President Charles Evans is also set for a speech on monetary policy at Marquette University Business Leaders Forum at 1:00 p.m., while San Francisco Fed President John Williams will discuss the economic outlook at 5:00 p.m. at the UCLA Anderson Forecast Center in LA.

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