'Cable Cowboy' Malone weighs his next flow in Europe

LONDON A technology after "Cable Cowboy" John Malone converted the pay-television region in the united states of america, he is back in the spotlight -- this time in Europe, wherein he's plotting a role inside the consolidation of the British telecoms marketplace.

pinnacle of the billionaire rainmaker's want listing is what might be a transformational deal between Liberty global (LBTYA.O), the London- and Denver-primarily based cable operator Malone chairs, and Britain's Vodafone (VOD.L). Combining their operations in Europe would create the continent's biggest communications business enterprise with broadband and cell operations spanning numerous nations.

but with a market value of sixty one billion kilos ($88 billion)and a wildly special technique to debt and dealmaking, the blue-chip British cell operator, the arena's 2d biggest, isn't always an clean in shape.

Any strive at a merger could also be complicated by way of Malone's desire for proudly owning huge chunks of the voting rights in his firms, which means the seventy five-12 months-antique may want to steer Vodafone to change belongings or do man or woman market deals as an alternative.

"John would like to do something in Europe, however he would not understand what to do and is reluctant to give up his splendid votes which would be the case with Vodafone," an enterprise executive who is aware of Malone instructed Reuters at the situation of anonymity.

The government added: "There are not many offers available. there's smallish things they could do but nothing this is transformative. Deal guys get frustrated when there are not any deals to do."

the two agencies this yr agreed a joint task in the Netherlands, a small marketplace for both, in what was seen as a test case for compatibility once they failed to agree a deal in any other marketplace in spite of months of negotiations.

The 50-50 joint challenge after integration fees changed into worth round three.five billion euros in mixed revenue and capital expenditure. Vodafone paid 1 billion euros in cash to Liberty to equalize ownership.

the larger prize might be back at the table after european regulators last month blocked the sale of england's 2nd biggest cell operator, O2, to CK Hutchison (0001.HK).

With O2 back in play, the asset, owned by using Spain's Telefonica (TEF.MC), could be used as a bargaining chip.

"If Vodafone felt that Liberty became critical (about looking at O2) that they had probable come lower back to the table," a pinnacle 10 Vodafone investor informed Reuters, asking now not to be named because of employer policy.

He mentioned the talks in 2015 broke down over headaches over valuations, no longer over the general strategic vision.

"after they had been in talks I do not assume there was any debate across the strategic motive or the scale of the prize."

becoming a member of FORCES

Malone, the biggest private landowner in the usa with 2.2 million acres, has constructed his empire over greater than forty years of dealmaking within the cable and pay-tv enterprise.

His Liberty global is the sector's largest global tv and broadband employer, running in more than 30 international locations in Europe, Latin the usa and the Caribbean via a series of various emblem names. In many of its markets, together with Europe, it'd benefit from owning a cell operator, however.

Vodafone boasts 462 million clients across Europe, Africa, India, Turkey and Egypt, but most effective owns cell in a number of them and will use its personal fixed-line assets.

investors in choose of combining the agencies' eu operations say synergies would help address modified customer conduct, in which thousands and thousands of humans now watch leisure on mobile telephones and via net-related TVs.

however even though a deal might also make sense on paper, analysts say there are numerous critical limitations to creating it a fact.

Malone owns round 24 percent of Liberty's voting stocks, and merging Liberty and Vodafone's eu bases could in all likelihood dilute that control.

"For him to do a transformational deal however lose manage, it is now not excellent," said one telecommunications banker, who requested now not to be named. "it is a piece like promoting out without a premium."

Arete analyst Steve Malcolm stated the shape may not paintings for some Vodafone shareholders.

"There are lots of shareholders who likely wouldn't thoughts him (Malone) having loads of have an impact on but there are some who truly can not personal shares in a enterprise in which they are subordinated to a man who owns five percent of the fairness," Malcolm said.

"the use of extraordinary balloting stocks way that Liberty international has a unusual capital structure. it works for a completely loyal band of Malone followers who are happy with the scenario however it would not continually paintings in a greater widely-held uk %-form of organization." 

the two corporations are also culturally extraordinary in other ways.

Vittorio Colao, who leads the FTSE-indexed Vodafone, is tons greater careful approximately debt-fueled deals than his American counterpart. Vodafone had net debt of 29.2 billion pounds at the quit of March, compared with its marketplace cap of 62 billion kilos.

In contrast, Liberty is enormously geared. Liberty global group had $45 billion of internet debt, in comparison with a market capitalization of $38 billion. Combining all the debt issued via its unique brands, it's miles one among the biggest issuers of sub-funding grade bonds inside the global.

after which there's tax. The truth that Liberty is able to use historic losses from its British operations to offset the tax it pays as a collection could probable complicate any attempt to cross the path of doing only a British deal.

Malone has stated he believes the 2 firms could make a terrific in shape. For his element, Colao frequently dances across the query.

"I almost see two lines that tend to visit the same factor within the future," he told analysts in 2014. "So they're no longer parallel, however when will these lines move it relies upon on the evolution of the company and the company strategies of  distinctive entities.