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Shares in Vodafone are down 2.5% this morning, depriving the UK Index of a valuable 5pts, after it confirmed preliminary discussions with international cable network owner Liberty Global about the acquisition/swap of overlapping continental European assets (Germany, Eastern Europe). Shares in CityFibre Infrastructure, however, are faring worse, down closer to 4%. This may stem from worries that any VOD-LIB transaction harms wholesale fibre-optic infrastructure company CITY’s recently announced partnership with VOD, one focused on delivering full Fibre-to-the-premises (FTTP) to up to 5m UK homes and business across 12 cities over the next eight years to help fix the UK’s relative digital inadequacy.
A VOD-LIB transaction could mean the CITY-VOD partnership suffers, especially if continental assets offer better investment opportunities. Milton Keynes may well have just been announced as the first site for the CITY-VOD partnership rollout, but with Liberty Global owning Virgin Media – 1m connections up to 300Mbps, itself trying to connect to 4m UK premises – with which VOD/CITY would be in direct UK competition, might the proposed 12 city roll-out need to be slowed up as a concession?
Possibly worse news for the smaller partner than the telecom giant, especially if the latter changes its priorities.
Mike van Dulken, Head of Research, 5 Feb 2018
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