* Kabel Deutschland seeks binding bids in two weeks
* Anti-trust authorities to study any Liberty Global deal
* Liberty Global has bought UK's Virgin Media, Dutch stake
* Vodafone leverage lower than telecom peers
By Paul Sandle and Sophie Sassard
LONDON, June 18 Vodafone faces a battle
for Germany's largest cable company, Kabel Deutschland
, although rival bidder Liberty Global of
the United States has bigger regulatory and funding hurdles to
Liberty Global, which owns Unity Media, Germany's second
biggest cable operator, joined the race on Tuesday. It tabled an
85 euro a share offer, according to a person familiar with the
matter, days after the British mobile company said it was in
talks about a deal.
Vodafone wants to buy the cable company so that it can offer
TV, fixed line and broadband to more of its mobile customers,
while Liberty Global wants more consolidation in one of its best
performing markets. Vodafone offered about 81-82 euros a share
in cash, sources said last week.
Shares in Kabel Deutschland were trading 3.8 percent higher
at 85.6 euros by 1010 GMT, valuing the group's equity at 7.56
billion euros ($10.1 billion).
A Liberty Global deal would be closely scrutinised by German
anti-trust authorities, a hurdle recognised by Liberty Global's
chief financial officer Charles Bracken last week.
He told a Goldman Sachs cable conference on June 12 that
while the industrial logic for consolidation in Germany was
compelling, regulatory opposition remained a significant barrier
to any deal in the near future, the bank said in a note.
Germany's competition regulator in February blocked Kabel
Deutschland's bid to take over smaller Berlin-based cable group
Telecolumbus for 618 million euros.
A source familiar with the situation said Liberty has
already talked to German antitrust office to discuss the deal,
but declined to elaborate.
Liberty Global customers in Germany are in the densely
populated German state of North Rhine-Westphalia as well as in
Hesse and Baden-Wuerttemberg, while Kabel Deutschland is active
in the rest of Germany.
Liberty Global's Unity Media Kabel BW and Kabel Deutschland
hold about 15 percent of the German broadband market. With
cheaper prices and higher speeds, they have been winning
customers from Deutsche Telekom, which still has more
than 40 percent of the market.
Vodafone holds roughly 12 percent of the German broadband
market, and rents wholesale capacity from Deutsche Telekom to
provide the service to customers.
A source familiar with the situation said Kabel Deutschland
had requested binding bids in two weeks. The ability of the
bidders to fund a deal would also be considered, the source
added, pointing to concerns about Liberty's finances given its
Liberty, which is owned by U.S. tycoon John Malone, bought
Virgin Media in Britain for about $15.75 billion in February and
a 13 percent stake in Ziggo in the Netherlands for
633 million euros ($844.9 million) in March.
For its part, Vodafone can finance the offer since its
leverage is lower than telecom peers. But ratings agency Fitch
said that the group would be downgraded by one notch if it
acquired Kabel Deutschland without taking other measures to
Analysts also said on Wednesday that Liberty would be able
to reap fewer synergies from buying Kabel Deutschland than
Vodafone, possibly hurting the price the U.S. group could offer.
Will Draper, an analyst at Espirito Santo Investment Bank,
said for Liberty Global costs could be saved in areas such as
billing, customer care, brand, content and R&D that would be
worth as much as 8-10 euros per Kabel Deutschland share.
For Vodafone, synergies would be 16 euros per Kabel
Deutschland share, stemming from moving its broadband customers
in the Kabel Deutschland area onto the cable infrastructure.
"Other benefits which are harder to quantify are the
potential for cross selling services and the defence of its
mobile business against the possibility of a strengthened MVNO
offer from Kabel Deutschland," he said.
Vodafone, Liberty Global and Kabel Deutschland declined to
comment on Wednesday.