Vodafone breaks cover: confirms bid talks with Kabel Deutschland

The likelihood of a Vodafone approach to Kabel Deutschland has been leaked for several months and the value of the potential deal is now put at roughly €10 billion. Most recently, the company's room to maneuver has no doubt been enhanced by its US$3.15 dividend windfall from Verizon,

(see - Quids in!! Vodafone hits the jackpot with US$3.15 billion dividend on stake in Verizon Wireless) so it has some cash to flash if necessary, but Vodafone points out that it has not even discussed the "terms (merger, buyout, merger with cash etc) on which an offer might be made." It's early days.

In April last year Vodafone bought up C&W Worldwide which gave it some handy UK infrastructure: creating "a leading integrated player in the enterprise segment of the UK communications market and bringing attractive cost savings to our UK and international operations,” said the Vodafone CEO at the time. (see - C&W Worldwide says ta ta to the independent life...)

However so far it hasn't been focussed on strengthening its European multi-play position and some observers think that is now clearly part of Vodafone's strategy, hence the approach to Kabel Deutschland. Going quad-play (fixed and mobile telephone, broadband and video) is deemed by many to be the most likely to succeed long-term strategy for customer retention in the more mature European markets.

Warwick Business School Assistant Professor of Strategy, Ronald Klingebiel, an expert in telecoms investment decision-making, is not yet convinced that Vodafone is indeed fully committed to this strategy.

"[The move] makes a lot of sense in terms of getting capacity, but it doesnt yet indicate that they are truely going after a quad play," he said. "In Germany they have a particular problem in that Deutsche Telekom is moving to vectoring, so it might not be as easy to access the capacity they need," he said. Owning a cable property would greatly ease that.