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Liberty and Vodafone Plan Major New Force in Dutch Telecoms

A SIM card of Vodafone is pictured in front of a letter of Vodafone in DortmundA SIM card of Vodafone is pictured in front of a letter of Vodafone in Dortmund
A Vodafone SIM cardPhotograph by Ina Fassbender — Reuters

The Netherlands may soon feel a strong new force in the telecoms market, in the form of a planned joint venture between Vodafone and Liberty Global’s Ziggo.

Vodafone(VOD) is the number-two mobile network operator in the Netherlands, the leader being former state telecoms firm KPN(KKPNY). Ziggo (bought by John Malone’s Liberty Global(LBTYK) in 2014) is the biggest Dutch cable operator, with KPN taking second place in that specific market — although fiber-rich KPN is the biggest Dutch Internet service provider by far.

In other words, the new joint venture will (if it gets regulatory clearance) be a stronger rival to KPN, with a “converged” package of services including video, broadband, mobile and business services.

“Together we will be a stronger competitor in the Netherlands, benefiting customers of both companies and the market as a whole,” said Vodafone Group boss Vittorio Colao in a statement (PDF).

Vodafone is on a general mission to provide this sort of convergence across its European businesses — another example being its purchase of German cable company Kabel Deutschland a couple years back, in order to fuse it with Vodafone’s German mobile business.

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Liberty Global and Vodafone have been dancing around one another for a while, and were for a while considering a wider swap of European business assets to aid this convergence push. Those talks collapsed last September, before resuming in a more focused, Dutch setting.

The new 50:50 joint venture will continue to operate under both the Vodafone and Ziggo brands. It will have over 15 million subscriptions, and the combination will lead to run-rate savings of €280 million ($313 million) per year by the fifth year of joint operation.

Vodafone will pay Liberty Global €1 billion to equalize ownership in the joint venture, after taking into account the current value of each business and deducting Ziggo’s €7.3 billion of net debt.

At the time of writing, Liberty Global and Vodafone’s shares were up 4 and 2 percent respectively, while KPN’s were down by 1 percent.