‘Cable Cowboy’ Malone weighs his next move in Europe

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LONDON: A generation after “Cable Cowboy” John Malone transformed the pay-TV sector in the United States, he is back in the spotlight — this time in Europe, where he is plotting a role in the consolidation of the British telecoms market.

Top of the billionaire rainmaker’s wish list is what would be a transformational deal between Liberty Global (LBTYA.O), the London- and Denver-based cable operator Malone chairs, and Britain’s Vodafone (VOD.L). Combining their operations in Europe would create the continent’s biggest communications company with broadband and mobile operations spanning several countries. But with a market value of 61 billion pounds ($88 billion)and a wildly different approach to debt and dealmaking, the blue-chip British mobile operator, the world’s second biggest, is not an easy fit.

Any attempt at a merger would also be complicated by Malone’s preference for owning large chunks of the voting rights in his firms, meaning the 75-year-old may need to persuade Vodafone to swap assets or do individual market deals instead.

“John would like to do something in Europe, but he doesn’t know what to do and is reluctant to give up his super votes which would be the case with Vodafone,” an industry executive who knows Malone told Reuters on the condition of anonymity.

The executive added: “There aren’t many deals out there. There’s smallish things they could do but nothing that is transformative. Deal guys get frustrated when there aren’t any deals to do.”

The two companies this year agreed a joint venture in the Netherlands, a small market for both, in what was seen as a test case for compatibility after they failed to agree a deal in any other market despite months of negotiations. The 50-50 joint venture after integration costs was valued at around 3.5 billion euros in combined revenue and capital expenditure. Vodafone paid 1 billion euros in cash to Liberty to equalize ownership.

The larger prize could be back on the table after European regulators last month blocked the sale of Britain’s second biggest mobile operator, O2, to CK Hutchison (0001.HK).

With O2 back in play, the asset, owned by Spain’s Telefonica (TEF.MC), could be used as a bargaining chip.

“If Vodafone felt that Liberty was serious (about looking at O2) they’d probably come back to the table,” a top 10 Vodafone investor told Reuters, asking not to be named because of company policy. He noted the talks in 2015 broke down over complications over valuations, not over the overall strategic vision.

“When they were in talks I don’t think there was any debate around the strategic rationale or the size of the prize.”

Malone, the largest private landowner in the United States with 2.2 million acres, has built his empire over more than 40 years of dealmaking in the cable and pay-TV industry.

His Liberty Global is the world’s largest international TV and broadband company, operating in more than 30 countries in Europe, Latin America and the Caribbean through a series of different brand names. In many of its markets, including Europe, it would benefit from owning a mobile operator, however.

Vodafone boasts 462 million customers across Europe, Africa, India, Turkey and Egypt, but only owns mobile in some of them and could use its own fixed-line assets.

Investors in favor of combining the companies’ European operations say synergies would help address changed consumer behavior, where millions of people now watch entertainment on mobile phones and through internet-connected TVs.

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