* Appoints Goldman Sachs to advise on options-source
* Kabel Deutschland hires Morgan Stanley, Perella-source
* Potential 10 bln deal would transform German telco market
* Vodafone looking at fixed assets in Europe
* German antitrust regulator would need to review deal
By Arno Schuetze and Peter Maushagen
FRANKFURT, Feb 19 Vodafone moved closer to a
possible 10 billion-euro bid for German cable operator Kabel
Deutschland by hiring long-time banker Goldman Sachs
to advise on options, a person with direct knowledge of
the matter told Reuters on Tuesday.
Kabel Deutschland, Germany's biggest cable company, has
retained Morgan Stanley and advisory firm Perella
Weinberg to defend its interests in the event of a Vodafone
approach, a second person with direct knowledge said.
An acquisition would transform the German telecoms market,
which has been one of the more resilient in a European sector
plagued by deflation in prices and tough competition.
It would also be Vodafone's biggest deal since it entered
India in 2007 and mark a change in strategy for the group that
has long has owned largely mobile operations in continental
Europe and relied on renting broadband lines from competitors.
Sector bankers and some analysts argue that Vodafone needs
to acquire fixed assets to fight off challenges from low-cost
mobile players and telecom and cable rivals pushing discounted,
all-inclusive mobile and fixed bundles.
Vodafone could save around 300 million euros a year by
relying less on Deutsche Telkom lines into consumers' homes and
might also offload mobile traffic on to its own fixed network.
Vodafone is now neck and neck with Deutsche Telekom in terms
of mobile market share, while it holds only 12 percent of the
broadband market to Deutsche Telekom's around 40 percent.
Germany's cable operators, led by Liberty Global's Unity
Media brand and Kabel Deutschland, hold about 13
percent of the broadband market and have been winning customers
from Deutsche Telekom with cheaper prices and higher speeds.
Vodafone would boost its presence in its biggest European
market in Europe by acquiring Kabel Deutschland but would need
clearance from competition regulators who have blocked cable
mergers over concerns about higher prices for consumers.
TELE COLUMBUS HITCH
On Tuesday, Kabel Deutschland said its agreement to buy
fellow cable operator Tele Columbus for 618 million euros ($825
million) was at risk due to German antitrust concerns, opening
the door for a counterbid from rivals.
UnityMedia has always said it would look at opportunities in
the German market, but it may have to act fast as cable deals
have become hot in recent weeks helped by easier access to
financing on debt markets.
Deutsche Telekom has also in the past expressed
interest in Tele Columbus.
Kabel Deutschland said late on Monday it had offered to sell
Tele Columbus networks in Berlin, Dresden and Cottbus, but the
compromise was viewed as insufficient by the German Federal
Cartel Office (FCO).
"The FCO requires the divestment of approximately 60 percent
of the Tele Columbus networks in Eastern Germany - twice as many
as offered by Kabel Deutschland," Kabel Deutschland said in a
Kabel Deutschland's network covers some 8 million households
compared with 7.8 million for Liberty, which earlier this month
struck a $15.7 billion deal to buy British cable group Virgin
The German cartel office had no comment on a possible
Vodafone bid for Kabel Deutschland.
Espirito Santo investment bank said a Vodafone deal for
Kabel Deutschland would be less likely to run into antitrust
"We do not believe the FCO's decision with respect to Tele
Columbus closes the door to a move by Vodafone," wrote the
analysts. "In our view the key difference between the situations
is the ownership of the customer networks."
Vodafone's broadband business relies largely on renting
lines from market leader Deutsche Telekom, while Tele Columbus
has its own network in Eastern Germany.
Vodafone, Goldman Sachs, Morgan Stanley
, Kabel Deutschland declined to comment. Perella was not
immediately available for comment.