Vodafone Drops Amid Plan for Tie-Up With Liberty Global

Vodafone Group Plc (VOD) fell as much as 4.2 percent after people with knowledge of the matter said the company is considering a combination with John Malones Liberty Global Plc (LBTYA) to create a European phone, Internet and TV company valued at more than $130 billion.

The British phone company is holding internal deliberations and analyzing the financial and regulatory hurdles as well as investor support for a share-based transaction, the people said, asking not to be identified because the matter is private.

No formal negotiations with Liberty are under way, theres no guarantee a deal will be reached, and valuation and regulatory issues remain key obstacles, the people said. In particular, Vodafone has concerns about the combined companys debt levels and the reaction of its own investors to a deal, one of the people said.

The case for a combination has been strengthened after BT Group Plc, the former U.K. phone monopoly, entered talks to buy either Telefonica SAs O2 unit or EE, the wireless carrier co-owned by Orange SA and Deutsche Telekom AG, two of the people said. The likelihood of a deal has also increased as Vodafone bolsters its fixed-line operations and Liberty moves toward offering mobile services in some markets, they said.

Vodafones Chief Executive Officer Vittorio Colao, when asked in September whether Liberty Global would be a good fit for the wireless carrier, said he would consider buying it for the right price. Close

Vodafones Chief Executive Officer Vittorio Colao, when asked in September whether... Read More

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Vodafones Chief Executive Officer Vittorio Colao, when asked in September whether Liberty Global would be a good fit for the wireless carrier, said he would consider buying it for the right price.

While Vodafone is examining several options in the wake of BTs negotiations, Liberty remains the likeliest partner for a transaction, one of the people said.

Vodafone fell 3.9 percent to 224.75 pence at 9:04 a.m. in London after earlier dropping as low as 224.15 pence for the biggest intraday decline since June. Cable operator Libertys shares climbed 7.4 percent to $51.99 on Nov. 28 in New York.

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Vodafone Drops Amid Plan for Tie-Up With Liberty Global