German court blocks Liberty Global cable deal

The €3.2bn acquisition of Kabel Baden-Wurttemberg by Liberty Global has been blocked by a German court, casting doubt on the latest attempts to consolidate the country's cable industry.

Liberty agreed to buy Germany's third-largest cable operator from Swedish private equity investor EQT Partners for €3.2bn in 2011.

The US cable operator received regulatory clearance to proceed with the acquisition of its German rival, which was taken by analysts as a major step towards a wider consolidation of the country's cable market. Liberty already owns Germany's second-largest cable operator UnityMedia.

However, a state court in Dusseldorf on Wednesday ruled that the German antitrust regulator would need to re-examine the case following a challenge by Deutsche Telekom, the country's biggest telecoms group and the former owner of its entire cable network.

The cartel office had originally cleared the deal following attempts to alleviate competition concerns, such as the removal of encryption of digital TV and opening up bids for contracts with Germany's housing associations. Liberty said on Wednesday that it would appeal the ruling at Germany's top civil court.

The court criticised the remedies as not adequately addressing certain competition issues, though its decision is pending Liberty's appeal at the federal supreme court. The cartel office will need to make a new decision on the deal unless the ruling is overturned on appeal.

Attempts at consolidating the German cable industry have been repeatedly frustrated in the past. The cartel office in 2002 blocked Liberty from buying the national cable network, which the watchdog had forced Deutsche Telekom to sell. The network was subsequently sold off in regional blocks.

The ruling may mean even more stringent concessions on the deal, which will frustrate Liberty in particular as rivals continue with their own consolidation attempts. Vodafone is progressing with its €7.7bn bid to acquire Kabel Deutschland, a group that Liberty had also registered interest in buying.

The Vodafone deal will still need to be scrutinised by competition authorities, with the UK-based group hoping for approval before the end of the year.

Analysts said that there was limited impact on the Vodafone deal in terms of antitrust remedies, though the court decision could lead to delays given the need for a thorough review.

A fast-track review now looked unlikely, according to analysts at Commerzbank, adding that "we see a risk of delays to deal closure".

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Liberty is the largest international cable company with operations in 14 countries, and has recently stepped up its dealmaking activity, buying Virgin Media in the UK as well as building a stake in its Dutch rival Ziggo.

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