Vodafone rings down the curtain on City’s fondest hopes

Comment Martin Flanagan

As you were, stand easy. The stock market rumour mill, a geography sometimes informed by inside information or ennui, had seen Vodafone’s shares jump 4 per cent in early trading yesterday.

It was rooted in conjecture that the British telecoms major and US rival Liberty Global might be considering a full-blown marriage. But late afternoon the excitement subsided as Vodafone took some air out of the market’s coloured balloon in a statement saying that while it was indeed in early talks with Liberty Global, it was only regarding “certain overlapping continental European assets” owned by the Americans.

Rubbing the disappointment in, Vodafone’s statement said it was “not in discussion with Liberty Global regarding a combination of both companies”.

Vodafone’s shares still finished up 2.4 per cent, but it was an anti-climax, as if the City incarnate had lost a £20 note in the pub only to find a fiver on the pavement outside. The market may be over-doing the disappointment. Any deal involving just both companies’ European assets could be a value-creating shake-up of the sector.

Vodafone owns wireless networks across Europe, including the UK – where it is the second biggest provider – Germany and Italy. Liberty Global owns the Virgin Media business in the UK and UPC, a pan-european cable network with a particularly strong German footprint.

The City has been tantalised since the two companies held abortive talks in 2015 about a big asset swap. Latest developments amount to the rumours entering a twilight zone. Vodafone’s shares are likely to be range-bound for a while until more detail emerges of exactly what is being discussed with the Americans.