Vodafone may have to increase its bid for Kabel Deutschland to around €11 billion ($14.7 billion) to sway the deal, according to the UK’s Sunday Times newspaper, after the German cable company rebuffed the UK operator’s initial advances last week.
Kabel Deutschland (Unterfoehring, Germany), the largest cable company in Germany, last week turned down Vodafone’s offer of €10 billion and has reportedly said that Vodafone (Newbury, UK) will have to make a higher offer simply to gain access to its books.
A takeover of Kabel Deutschland would dramatically improve Vodafone’s position in Germany’s broadband and TV markets, where the operator faces tough competition from Deutsche Telekom (Bonn, Germany) besides the cable companies.
The operator served just 3.14 million broadband customers in Germany at the end of March this year, and the number had fallen from 3.39 million a year earlier.
Deutsche Telekom, by comparison, had 12.4 million broadband customers at the end of March.
Although the German incumbent appeared to lose market share to its cable rivals, its customer numbers were unchanged since March 2012 and it recently won regulatory approval of plans to invest in new high-speed networks that should make it a stronger competitor henceforth.
Vodafone has tried to bolster its own broadband standing by agreeing a wholesale deal with Deutsche Telekom for use of the higher-speed technology, but a takeover of Kabel Deutschland would immediately boost its market share and give it control of its own infrastructure.
Kabel Deutschland served a total of 8.5 million internet and telephone customers at the end of 2012, reporting revenues of about €465 million for the final three months of the year.
A €11 billion bid, however, would value Kabel Deutschland at nearly 14 times its earnings before interest, taxation, depreciation and amortization for the 2012 financial year.
Moreover, there is speculation that Liberty Global (Meridian, CO, USA) – which operates telecoms networks across the European region through its UPC subsidiaries – may also table a bid for Kabel Deutschland, having recently shored up its assets with a takeover of the UK’s Virgin Media (Hook, UK).