Pressure from competition regulators could prompt Liberty Global to abandon Germany if it can no longer pursue its growth ambitions in Europe's biggest cable market, sources have told Reuters.
The company owns Unitymedia KabelBW, Germany's No.2 cable operator - formed when Liberty bought KabelBW for 3.3 billion euros ($4.1 billion) three years ago and merged it with its subsidiary Unitymedia.
But last year a regional court reversed a 2011 antitrust approval of the KabelBW acquisition and ruled that regulators must re-examine the deal. Unitymedia filed a complaint against the ruling, taking the case to Germany's Federal Court of Justice. A decision is still pending and could take months.
If the federal court upholds the ruling, Unitymedia KabelBW could be forced to make concessions to protect competition or - at worst - to unwind the merger.
The case has provided further evidence to Liberty - Europe's biggest cable group - that it will not be allowed to expand through acquisitions in Germany, and it is now open to selling Unitymedia KabelBW, according to two people familiar with the company's thinking.
"If the offer is good enough, they would consider it," said one of the sources.
The ruling came only weeks after Liberty backed out of a bidding war with Vodafone for Germany's largest cable operator Kabel Deutschland after learning that the German competition watchdog would foil such a deal.
"That is when Liberty Global decided Germany no longer was a growth market," the second source said.
Liberty's Chief Financial Officer Charles Bracken told Reuters he expected the obstacles in the country to be overcome. "In Germany we are facing a shakedown from the regulators. But the KabelBW transaction will not be unwound. We are working to negotiate a solution with regulators."
Asked whether the firm wants to quit the country, Bracken said: "We love Germany."
A Liberty spokesman declined to comment further.
FASTER
Exiting Europe's biggest cable market would be a serious blow for Liberty as Unitymedia KabelBW generated almost a fifth of total revenues of $14.5 billion last year and almost a quarter of total operating cash flow of $6.74 billion.
The court case against the merger was brought by Deutsche Telekom, which has been hard hit by the success of Unitymedia KabelBW and Kabel Deutschland.
Both cable companies have snatched customers from established telecoms players such as Deutsche Telekom, with their upgraded networks offering home and office Internet at speeds that are often five times faster.
The first source said that if Liberty lost the legal battle, one of the options open to Germany's competition watchdog - the Federal Cartel Office - would be to force the company to divest a third of its German assets.
If that happened, Liberty "may as well pull the plug", the source said.
A third person familiar with Liberty's thinking said that, regardless of the outcome of the case, technology and media-focused private equity investors would be keen to snap up Unitymedia KabelBW if it was put up for sale.
"They (Liberty management) are considering various scenarios, but are pretty relaxed about it," the source said.
Liberty Global is backed by U.S. tycoon John Malone, who also controls Liberty Media Corp and Discovery Communications. It has been a serial buyer of cable companies in Europe for the past decade and turned to buying TV assets in recent months.
Earlier this year it bought British production group All3Media and a 6.4 percent of British broadcaster ITV.
