Liberty does German u-turn
Wooing the regulators
Liberty Media Corp has made a surprise U-turn in order to get regulatory approval for its 5.5bn euro ($4.8bn) acquisition of six cable TV networks from Deutsche Telekom AG.
The Englewood, California-based operator had originally refused regulators'insistences that it invest heavily on bringing the cable TV networks up to date to provide high-speed internet and telephone services. But yesterday in a press conference it revealed an offer to invest $8.3bn ($7.2bn) through 2010.
Previous to the change of heart, it had seemed that the German regulators would make a final refusal at the end of this month, and that Liberty's hopes of completing the deal rested with a possible overturn of the decision by the German government. Now it seems likely the deal will go ahead.
It is possible that Liberty was bounced into making the assurances after Compere Associates, a London, UK-based private equity firm repeated its intention to step in if regulators blocked the deal. If the German government believed that Telekom would struggle to find another buyer, it may have been tempted to ensure the Liberty deal went through, as the German incumbent desperately needs to reduce its debts and proceed with the IPOs of spin-offs, most notably that of T-Mobile. Compere's overtures could have convinced Liberty that it had to make concessions to get the deal through.
Liberty's European expansion plans are currently in full swing. It already has a 25% stake in Telewest Communications Plc, the UK number-two cable operator, and is currently weighing up the possibility of investing in the UK number one, NTL Inc, which could lead to an eventual merger. Earlier this month it increased its control of European cable operator United Pan-Europe Communications after the Amsterdam, Netherlands-based company defaulted on debt payments.
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