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Vodafone Group Agrees to Kabel Deutschland Deal

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LONDON -- Shares in Vodafone (LSE: VOD  ) (NASDAQ: VOD  )  rose 1.5% in early trade this morning, as the telecoms Goliath announced its intention to acquire Kabel Deutschland in a deal worth 7.7 billion euros.

Although rumors of an acquisition have been floating around for months, Vodafone only officially announced a preliminary approach for the German cable operator two weeks ago, with an indicated bid of 80 to 82 euros per share.

However, days later, U.S. firm Liberty Global threatened to derail the British-based company's bid after putting an offer of 85 euros per share onto the table, which valued Kabel Deutschland at 7.5 billion euros.

Subsequently, Vodafone fended off this rival bid by going back with an offer worth 87 euros per share in cash, valuing Kabel at 7.7 billion euros in total (6.6 billion pounds), which has been accepted.

Group chief executive Vittorio Colao commented:

German consumer and business demand for fast broadband and data services continues to grow substantially as customers increasingly access TV, fixed and mobile broadband services from multiple devices in the home and workplace and on the move. The combination of Vodafone Germany and Kabel Deutschland will greatly enhance our offerings in response to those needs and is consistent with Vodafone's broader strategy of providing unified communications services. 

The transaction announced today -- which the Management and Supervisory Boards of Kabel Deutschland intend to recommend to their shareholders -- will lead to the creation of an operator with significant competitive scale, attractive operating and capital investment efficiencies and a combined management team with expertise across all communications segments and technologies. We look forward to welcoming the people of Kabel Deutschland to Vodafone and to working together to build an advanced unified communications provider to serve customers across Germany.

Kabel Deutschland is Germany's leading triple-play cable provider, with approximately 15.3 million homes passed, providing television, telephony, and broadband services to approximately 8.5 million connected households in 13 of Germany's 16 federal states.

The merging of the two companies will create a "leading integrated communications operator," with a combined 9.8 billion-euro pro forma revenue in Germany. Once the deal goes through, Vodafone will have 32.4 million mobile, 5 million broadband, and 7.6 million direct TV customers in the country.

Among its reasons for the acquisition, Vodafone management pointed at Kabel Deutchland's "highly attractive business with significant growth prospects," the fact that it "creates a leading integrated player in Vodafone's largest European market," and the fact that the pair's network infrastructures are "highly complementary."

Vodafone's 10.19 pence-per-share full-year payout now supports an income of around 5.6% for anyone wishing to buy today. However, the blue chip has said it "aims at least to maintain" its next dividend, suggesting next-to-no income growth in the near term.

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