Vodafone inks broadband agreement with Telefónica Deutschland in hopes of closing Liberty deal

In an effort to garner regulatory approval for its Liberty Global deal, Vodafone announced on Tuesday that it has signed an agreement to let rival Telefónica Deutschland access its broadband network in Germany.

Last year, Vodafone announced a $22 billion deal to buy Liberty Global's cable networks in Germany and central Europe, but it's still awaiting approval from the European Union. If the acquisition goes through, Vodafone would be better equipped to compete against market leader Deutsche Telekom in Germany.

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By allowing Telefónica Deutschland (DE) to use its broadband network across the Liberty Global's Unitiymedia's cable footprint in Germany, Vodafone hopes to ease some of the EU's regulatory concerns. A decision by the European Union on the Liberty deal is expected to be made by July 9.

The cable wholesale agreement between Vodafone and Telefónica Deutschland is subject to the completion of Vodafone's acquisition of Liberty Global's operations in Germany, the Czech Republic, Hungary and Romania.

Under the terms of the cable wholesale agreement, Telefónica DE will be able to market broadband services over the combined Vodafone and Unitymedia cable network in Germany that covers 23.7 million households.

In addition to providing more broadband choices across Germany, the agreement would help Telefónica DE move up from third place behind Deutsche Telekom and Vodafone in the fixed-line broadband market.

Telefónica DE’s customers would be able to access speeds of up to 300 Mbps on the combined cable network, which would enable it to deliver competitive broadband and over-the-top (OTT) TV services, according to the press release.

Vodafone said the cable wholesale agreement has been signed on a long-term basis, with "Telefónica DE committed to achieving a minimum level of customers over the term of the contract."

Following on the heels of discussions with the European Commission, Vodafone submitted a remedy package that outlined the cable wholesale agreement, and made a commitment to ensure sufficient capacity is available for OTT TV distribution.

The European Commission will conduct market testing of the remedy package, which is expected to conclude this month.

“Our deal with Liberty Global is transformational in many ways, said Vodafone CEO Nick Read, in a prepared statement. "It is a significant step towards a gigabit society, which will enable consumers and businesses to access the world of content & digital services at high speeds. It also creates a converged national challenger in four important European countries, bringing innovation a greater choice.

"We are very pleased to announce today our cable wholesale access agreement with Telefonica DE, enabling them to bring faster broadband speeds to their customers and further enhancing infrastructure competition across Germany.”

After many years of buying cable systems across Europe, Liberty Global, which is chaired by cable pioneer John Malone, previously sold its Austrian business, and is now looking to leave Switzerland, Germany and central Europe in what would be company's biggest-ever divestment.