Liberty Media’s agreed deal E5.5 billion deal to acquire six cable franchises from German media group Deutsche Telekom (see Deutsche Telekom Sells German Cable Regions To Liberty Media) looks set to be blocked by the country’s regulators, according to a number of reports.
It is understood that the Cartel Office in Germany is preparing to block the acquisition over worries that the US group will take too large a control of German cable TV market. This is despite the fact that Liberty has already backed out of a deal to take News Corp’s 22% stake in another Germany TV company, Kirch Gruppe, over worries that it might jeopardise its chances of securing the Deutsche Telekom franchise acquisition (see
Liberty Media Withdraws From Kirch Bid).
However, analysts note that the Cartel Office’s decision could still be overruled by the country’s economics minister. Deutsche Telekom plans to use the proceeds from the disposal to pay down its substantial debt and given that the German Government is a large shareholder in the company, an overruling by the economics minister is not an unlikely possibility.
The matter is further complicated by the fact that the deal only involves the cable backbone and not the ‘last mile’ connections that actually reach consumers’ homes. Liberty Media had planned to buy Teleglobe, a ‘last mile’ company from Deutsche Bank, in order to complete its network.
However, the Cartel Office is reported to have told Liberty that it can only acquire Deutsche Telekom’s cable interests if it pulls out of the Teleglobe deal. From Liberty’s point of view, such a move rather negates the value of the Deutsche Telekom deal in the first instance.
