* Vodafone group managers reviewing German plan -magazine
* Kabel Deutschland market capitalisation 6.1 bln euros
* Kabel shares jump 8.7 pct, Vodafone down 1.1 percent
(Adds background, analyst reaction)
By Harro Ten Wolde and Paul Sandle
FRANKFURT/LONDON, Feb 13 Vodafone is
considering a bid for Germany's Kabel Deutschland to
expand the UK-based mobile company's services in Europe's
biggest economy, according to a person familiar with the matter.
No final decision has been made at Vodafone about a formal
offer, the person said, of a deal which would enable the UK
company to sell bundled services of mobile, fixed-line and
pay-TV, which helps to boost customer loyalty.
Germany's Manager Magazin reported on Wednesday that the
head of Vodafone's German operations had put forward a plan to
buy the German cable operator to the group's senior management.
The news comes only a week after John Malone's Liberty
Global struck a deal to buy British cable group Virgin
Media for about $15.75 billion in stock and
Kabel Deutschland shares ended the day 8.7 percent higher at
69.17 euros, giving it a market capitalization of 6.1 billion
euros. Including 2.8 billion euros in net debt Kabel Deutschland
has an enterprise value of 8.9 billion euros ($11.9 billion).
Analysts polled by StarMine value Kabel Deutschland's
enterprise value at 10.8 times core profit. They expect Kabel
Deutschland's core earnings to reach about 970 million euros in
the year to June 2014.
Vodafone and Kabel Deutschland declined to comment.
Vodafone, unlike its main competitors, owns mostly mobile
operations in continental Europe, reducing its ability to offer
combined services to consumers or businesses and offload data
traffic onto its own fixed line networks.
Such considerations led Vodafone to buy British fixed
operator Cable and Wireless Worldwide (CWW) last year.
In Germany, however, it owns the Vodafone D2 fixed line and
broadband business. The business, previously known as Arcor, has
about 12 percent of the broadband market, against 40 percent for
Deutsche Telekom; the two companies are neck and neck in mobile.
Vodafone shares were down 1.1 percent to 172.1 pence.
Goldman Sachs and Bernstein Research analysts have written
that Vodafone should look at buying cable assets in Spain,
Germany and the Netherlands to keep up with competitors such as
Telefonica and Deutsche Telekom.
Vodafone has looked at Kabel Deutschland several times in
the past since it would complement its mobile business in
Germany, said a second person familiar with Vodafone's strategy.
Analysts at Espirito Santo Investment Bank said they could
see the rationale for such a deal.
"Vodafone said just last week at its results that M&A was
still on the cards to support its convergence strategy, as with
the recent CWW and Telstra deals," analyst Nick Brown said.
However, he added that Vodafone's fixed-line assets in
Germany meant any potential deal would face scrutiny from
Jefferies said a bid from Vodafone could flush out a counter
bid from Liberty Global, although the U.S. company had to make
significant concessions to win regulatory clearance for its
acquisition of KabelBW, another German cable operator, in 2011.
"Vodafone-Kabel Deutschland would elicit little regulatory
concern in our view, not least as it would create a more viable
competitor to Deutsche Telekom," they said.
Cable operators Liberty Global, Ziggo, Kabel
Deutschland and Virgin Media have been winning
customers and investors with their expansion into broadband.
Their cable lines, designed to deliver TV to homes, have
been upgraded to carry voice calls and Internet at speeds often
five times faster than competing services from the telcos.
Germany's cable market, which was once one of Europe's most
fragmented, still has a proliferation of smaller regional
players offering television and broadband services.
Cable firms have made relatively little inroads into
Germany's fixed broadband market.
Kabel Deutschland, the largest cable operator with about 15
million of the 28 million homes passed by cable, said in
December that the market penetration of it and its rivals in
fixed line broadband was below 15 percent.
(Reporting by Harro ten Wolde, Peter Maushagen, Philipp
Halstrick, Leila Abboud and Paul Sandle; Editing by Jane
Merriman and Mike Nesbit)