Liberty Global, the US telecoms group chaired by “cable cowboy” John Malone, has bought a stake of nearly 5 per cent in Vodafone worth £1.2bn, as it bets on the revival of its beleaguered UK rival.
The Denver-based company joins a host of foreign acquirers that have built positions in Vodafone, which in the last 12 months has battled against an activist campaign, lost its chief executive and seen its value fall by a third.
Liberty Global said it would not seek a board seat and was not considering making an offer to acquire Vodafone after revealing its 4.9 per cent stake.
“The stock’s cheap — it’s an opportunistic and financial investment,” chief executive Mike Fries told the Financial Times, adding that his company had $3.5bn in cash to “put to work”.
Fries said Vodafone had some “interesting catalysts” for potential value creation, including a proposed merger with CK Hutchison’s British business Three UK, for which talks are continuing.
“We only have one market with four mobile players — everyone else has consolidated to three — Ireland, Belgium, Holland, Switzerland. The UK is an anomaly,” he said. “We’re patient. We don’t know that any one or two things will happen overnight but we understand the publicly disclosed strategy and we think it’s a good one.”
Liberty Global owns Virgin Media O2, a rival telecoms operator to Vodafone in the UK, in partnership with Telefónica. The highly acquisitive US group has invested in 75 companies across telecoms, media and infrastructure.
It joins a star-studded roster of international telecoms names to identify value in the poorly performing UK group.
In September, French billionaire Xavier Niel announced that he had bought a 2.5 per cent stake in Vodafone via his investment vehicle Atlas Investissement. He wants Vodafone to streamline its business, drive down debt and improve cash generation. Meanwhile, United Arab Emirates telecoms operator e& has built a 13 per cent stake.
Liberty Global has been one of the most active dealmakers in European telecoms over the past five years, having sold, bought and merged various operators. In 2021 it closed a £31bn agreement to merge its Virgin Media business with Telefónica’s O2, and also sold its German and some eastern European assets for €18.5bn in 2018.
The Vodafone stake was financed mostly through derivatives, and required only £225mn in cash from Liberty Global, according to a person familiar with the matter.
Vodafone has had a challenging year after the FTSE 100 group came under pressure to simplify its sprawling business, shed poorly performing units and decentralise its global operations.
Europe’s biggest activist investor Cevian Capital bought a stake of undisclosed sized and sought a shake-up but sold out entirely after deciding change was unlikely to happen quickly.
Former chief executive Nick Read, under whose tenure Vodafone lost more than 40 per cent of its value, stepped down at the end of last year. He has been replaced on an interim basis by Margherita Della Valle, Vodafone’s chief financial officer.
Fries said he believed Vodafone had suffered from the same structural difficulties as other telecoms groups across Europe, including fragmented markets and regulators’ resistance to allowing consolidation, but argued that it appeared the environment was changing.
“Regulators have realised that investments should come with reasonable opportunities to make a return. They’ve started to support the industry more than in the past,” he said.
Liberty Global has not held discussions with either e& or Niel about the stake-building, Fries said.