Vodafone Credit Investors Relieved as Liberty Talks Scrapped

28 Sep 2015 | Author: | No comments yet »

Liberty Global Bonds Drop to Records as Talks With Vodafone End.

Vodafone, the world’s second biggest mobile operator, had said in June that it was considering swapping some assets with Europe’s biggest cable company. 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.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.

U.S. equity markets opened lower on Monday morning as investors digested a deluge of corporate news headlines, and a speech from the New York Fed president who said interest rates are likely to rise this year. 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.” 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. 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. 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.

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. 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.

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. 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 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. 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%.

The executive who leads Deutsche Telekom AG’s German unit said this month the company would oppose a merger of Liberty Global and Vodafone in its home country. 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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