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Vodafone, Deutsche Telekom in new wholesale talks - source

The Vodafone logo is seen at the counter of the shop in Prague February 7, 2012. REUTERS/David W Cerny
The Vodafone logo is seen at the counter of the shop in Prague February 7, 2012. REUTERS/David W Cerny

By Kate Holton

LONDON (Reuters) - Vodafone is in talks with Deutsche Telekom on a wholesale deal that would allow the British company to offer its German customers TV over superfast broadband, a person familiar with the situation said.

Vodafone, traditionally a mobile-only company which has to rent fixed lines in some markets to offer broadband, has come under pressure from investors and analysts to show how it can compete with cable TV groups and telecom firms who can lure customers with a combined offer for mobile, fixed calls, broadband and TV.

The combined offer, particularly from cable operators, has proved increasingly attractive as consumers watch more programming on TV, laptops and smartphones.

Some investors had feared the trend would force Vodafone to go on a Europe-wide spending spree to buy fixed-line assets, and sources told Reuters in February that it was weighing a 10-billion-euro bid for cable operator Kabel Deutschland.

But the fixed-line wholesale talks in Germany and a plan announced in March to build a fiber broadband network with France Telecom in Spain shows that Vodafone has options other than acquisitions. Shares in Kabel Deutschland were down 2.5 percent at 1350 GMT.

Vodafone declined to comment and Deutsche Telekom did not reply to requests for comment on Thursday.

Some analysts have said that the approach to Kabel Deutschland could have been designed to negotiate better wholesale terms from Deutsche Telekom.

The person familiar with the situation, talking on condition of anonymity, said Vodafone Germany and Deutsche had opened talks in December about agreeing a new wholesale deal for so-called VDSL bitstream technology. Vodafone has 34 million customers in Germany.

VDSL helps to increase speeds from a traditional copper network and the talks are about access to this and developments currently being worked on by Deutsche, called VDSL on a layer 2 basis and vectoring, which will provide even faster speeds of up to 100 Mbits per second and ensure the smooth delivery of TV over the internet.

The 100 Mbits per second compares to current levels of around 16 Mbits.

The source said discussions had been slow but were due to resume soon and that Vodafone did not rule out having to resort to the local regulator to seek help if they could not agree a price that works for both sides.

Vodafone already owns some fixed-line assets in Europe, including in Germany where it offers mobile and fixed lines to private and business customers, but it has quad-play services with TV, fixed and mobile calls on superfast networks only in Portugal.

(Additional reporting by Harro Ten Wolde in Frankfurt; Editing by Clelia Oziel)

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