Investors' first-day reaction to Vodafone's planned €7.7bn (£6.6bn) purchase of Kabel Deutschland was relief. That's for two reasons.
First, Vodafone appears to have knocked its main rival for the business – John Malone's Liberty Global – out of the running before the bidding reached silly prices. In theory, there is still time for Malone to return, but it's not the way to bet. Vodafone has a recommendation from Kabel's board and Liberty would face greater competition hurdles.
The second reason is that Vodafone chief executive Vittorio Colao gave a detailed account of the annual cost savings he hopes to achieve – some €300m by the fourth year, he said. The logic is easy to understand: by directly owning cable assets, Vodafone will reduce its reliance on renting fibre capacity from Deutsche Telekom.
So far, so good. But it would be hard to claim Vodafone is getting a bargain. Kabel's share price has more than trebled over the past three years and Vodafone's willingness to play at these levels clearly owes much to its realisation that being a mobile-only company is too dangerous to revenues. One can't quibble with the analysis (consumers have embraced bundled deals covering fixed and mobile telephony, TV and broadband) but Vodafone would clearly have been in a better position if it had acted earlier in Europe.
Maybe, in practice, that was impossible given the need to fight on so many non-European fronts. But the unanswered question is how much the embrace of cable will end up costing once it is applied across the continent – either in more acquisitions, or as standalone investment, or as wholesale rental deals.
"We see ourselves not as a mobile business any more, but as a data company," says Colao. Fair enough, but such corporate reincarnations tend to be expensive.
