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Should Vodafone finally dip its toe into the cable industry?

By PETER WHITE

Published: 18 February, 2013

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Vodafone is a cautious company and usually lets its subsidiaries make their own mind up about how to run their business. But the rumors about it buying Kabel Deutschland, one of the few large cable companies in Europe which Liberty Global cannot consider going after, is a very late play in fixed networks.

If the telecommunications world is going to turn on offering a quadruple play, then Vodafone is short of fixed lines. It has some in Germany, Spain and Italy, having bought Mannesmann and its DSL lines in Germany in 2000, and Tele2 in Italy and Spain in 2007. In fact it has broadband lines in every major country it is in, except the UK, where it started, but it can wholesale these from BT.

So suddenly it is expected to move from dabbling in telco based DSL lines, to wholesale acquisition of cable. Unfortunately it will have a tough time making a business case of it, given that Cable is rarely as profitable as cellular, but that, of course keeps the price down.

The real question is, whether or not cable plus cellular is more profitable than just cellular, and if quad play packaging really halts churn, then it is. We think it is time for Vodafone to find out and give this German deal more credibility than others which have been mentioned, and if it works out, it will move swiftly for acquisitions in Portugal and Spain, but there is no cable in Italy to buy.

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