Sunday, January 01, 2017

Vodafone & Liberty Global extract cash from & load debt on VodafoneZiggo

Observations from the establishment of the VodafoneZiggo joint venture:
  • Cash was extracted & debt was loaded by the parent companies. Future annual shareholder charges have been raised.
  • Leverage a la Liberty Global (4.5-5.0), even though mobile (with structurally lower margins & growth) is a large part of the business.
  • Vodafone comes first in the name & supplies the CEO, even though Ziggo is larger.
  • According to rumors, T-Mobile paid €90m for Vodafone Thuis, which had negative FCF of €73m in the 12 months to 20160930 only. The JV loses 150k subs to the KPN camp (T-Mobile NL & KPN Wholesale) as a result of the sale of Vodafone Thuis. Good deal for both.
  • IPO possible from 20200101, sale from 20210101. Any acquirer can save from cutting the annual shareholder charges.
A staged retreat from NL, by both Vodafone and Liberty Global, seems far from unlikely. If both agree, it can be done even before 20210101.