If Vodafone Group Plc (VOD) and Liberty Global Plc (LBTYA) really want to dominate the phone, cable and wireless market in Europe, they should quit competing and try merging.

The companies were among large cable and phone operators that gobbled up smaller players in more than $200 billion of European deals since 2011 to gain customers and market share. A merger of Vodafone and Liberty would be the next logical step, according to Bank of America Corp. Vodafone Chief Executive Officer Vittorio Colao told Bloomberg News last week that John Malones Liberty could be a good fit at the right price. A deal would create the biggest company in Europe selling bundled packages of mobile, phone, Internet and TV services.

A combined company could see a 3.2 percent jump in earnings per share from the deal by next year, were Vodafone to offer London-based Liberty a 20 percent premium, or more than $80 billion including debt, and pay for half in cash, according to Erhan Gurses, an analyst at Bloomberg Intelligence. Acquirers paid an average premium of 20 percent for cable assets in the last five years, he said.

It makes a ton of sense because Vodafone just bought cable companies in Germany and Spain and theres the sense that once you start on this track you dont stop, said Amy Yong, a media analyst at Macquarie Capital in New York. At the end of the day, Malone is not emotional about business. Hes rational, and at the right price he would obviously let Liberty go.

Vittorio Colao, Chief Executive Officer of Vodafone Group Plc. Close

Vittorio Colao, Chief Executive Officer of Vodafone Group Plc.

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Vittorio Colao, Chief Executive Officer of Vodafone Group Plc.

Selling mobile services alongside fixed offerings such as TV and Internet access in quad-play packages helps carriers generate more revenue and makes it less likely that a customer will leave. Thats vital for companies like Newbury, England-based Vodafone that have been struggling with oversaturated markets in Europe and sluggish economies that are eating into revenue. Even in the U.K., Vodafones home market, the wireless operator is only the No. 3 mobile provider.

Liberty, which has forged resale agreements with wireless providers, has also found that adding mobile service to its broadband and video packages cuts customer defections and increases sales, CEO Mike Fries said last week, appearing at the same New York conference organized by Goldman Sachs Group Inc. at which Colao spoke.

Original post:

Vodafone-Liberty Global Deal Is Way to End Duel: Real M&A