Today, Liberty Global has operations in 12 European countries: Germany, the UK, the Netherlands, Belgium, Switzerland, Austria, Ireland, Poland, Hungary, Romania, Czech Republic and Slovakia.
In some of these countries, Liberty Global has inherited or built an MVNO business: Virgin Mobile in the UK is the biggest with over 3 million MVNO subscriptions, followed by Telenet in Belgium with 900 thousand, Germany with 300 thousand and the Netherlands with 130 thousand. [In Hungary, Poland, Switzerland and Austria, Liberty Global has just a handful of MVNO subscriptions. In the other countries Liberty Global isn’t present as MVNO.]
But Liberty Global never demonstrated an interest to own a mobile operator. Until today.
KPN announced that it intends to sell BASE to Telenet. BASE, the third placed mobile operator in Belgium, has been up (or at least rumoured to be) for sale for a long time. The business results of BASE have weakened significantly: The EBITDA margin declined from 34% in 2012 to just 21% in 2014.
To a large extent Telenet is to be blamed: Many of BASE’s customers (who generally are cost-aware) have gone to Telenet’s MVNO – who in addition to providing a good mobile deal allows cable customers unlimited access to around 1,2 million Wi-Fi hot- and homespots with their mobile devices. In the 2012-2014 period, BASE lost 163k mobile SIMs (to 3,3 million) when Telenet grew 373k to 895k.
All those 895k SIMs are on Mobistar‘s network today, something that very likely would change would the deal go through. This represents a significant revenue and margin risk for Mobistar who – through a successful MVNO hosting and M2M strategy – has passed Proximus (Belgacom) as the largest Belgium operator when it comes to SIMs on the network. About half of Mobistar’s MVNO SIMs are via Telenet.
Will Telenet’s acquisition of BASE be approved? This is the big unknown. EU will likely request also this deal to be approved by the commission (which is busy with all those other telecom mergers in pipeline). As an indication of this uncertainty, KPN is pointing out that if the deal isn’t approved, they will get 100 MEUR in break-up fee.
We have previously said that Liberty Global is “hungry, but not particularly interested in mobile”.
Contributing to this could be that their only MNO operation – started as a add-on to their cableco VTR in Chile – hasn’t been successful.
Is Liberty Global just opportunistic when it comes to BASE then? After all, KPN didn’t really have anyone else to sell to. The use of the word “cost-effective” in Liberty Global’s release might suggest this:
“…a cost-effective and unique opportunity to expand Telenet’s mobile and fixed business in Belgium”
Or is this a change of strategy from Liberty Global? If so, this is really interesting. With a similar logic as in Belgium, we should then expect Liberty Global to consider buying:
- A mobile operator in Germany
- A mobile operator in the UK
- A mobile operator in the Netherlands
Given the mobile consolidation which already happened in Germany with Telefónica O2 buying E-plus (from KPN), Germany isn’t at all likely.
Assuming that Hutchison-Whampoa’s (owner of ‘3’) acquisition of Telefónica O2 UK wouldn’t be approved, then maybe Liberty Global can see an opportunity to own an MNO in the UK to transfer its Virgin Mobile base to. If it’s ‘3’ or O2 doesn’t really matter.
But the most interesting is perhaps the Netherlands. In parallel with the acquisition of Ziggo and the integration of UPC under the Ziggo brand name, Liberty Global has vitalised its MVNO setup in the Netherlands and refocused on sales. T-Mobile Netherlands – who sold off all fixed network assets even though that’s against the converged agenda of its owner Deutsche Telekom – is undergoing some strategic transformation seemingly inspired by T-Mobile USA.
For Deutsche Telekom – who might be considering whether it is right to be mobile-only in markets like the Netherlands and Austria where incumbents KPN and A1 (Telekom Austria) push a converged agenda – Liberty Global’s acquisition of BASE might be more than just interesting.