By Anjuli Davies and Kate Holton
LONDON (Reuters) - Vodafone (L:VOD) is reviewing potential acquisitions, including of Europe's leading cable operator Liberty Global (O:LBTYA), to counter the pending consolidation among rivals in Britain, five people close to the matter said.
The internal deliberations at the world's second-biggest mobile operator, have picked up pace in recent days after broadband leader BT Group (L:BT) revealed it was in parallel talks to buy either EE or Telefonica's 02 (MC:TEF).
If concluded, BT's foray into mobile is expected to tilt the market towards selling more all-included bundles of fixed and mobile services. That makes it more important for historically mobile-only companies such as Vodafone, EE, 02 and Hutchison's 3 to have their own fixed networks or be condemned to being simple resellers of BT's fibre.
The attraction of Liberty, which is backed by U.S. billionaire John Malone, is its ownership of cable networks capable of carrying very high-speed broadband traffic to homes and business in nearly a dozen European countries.
In Britain, Vodafone would get its hands on the broadband network of Liberty's Virgin Media, which covers around half of the country. That would bolster the broadband network Vodafone got in 2012 when it bought Cable & Wireless.
One person familiar with the situation said Vodafone had approached Liberty Global about a combination earlier this year but found a gulf on price expectations.
A deal would come after Vodafone undertook similar moves by buying the Ono cable company in Spain and Kabel Deutschland in Germany as it seeks to either buy or build fixed-line infrastructure across Europe.
In addition to Liberty, Vodafone is also considering all its options in Britain to bolster its broadband operation including a deal for low-cost player TalkTalk (L:TALK), although this is seen as a weaker option since the company does not have many fibre lines going into consumers homes.
"Liberty is the obvious one that makes sense," said a third person close to the situation. "Vodafone need fibre and that is what Liberty has."
A fourth person said Vodafone's strategy team had been meeting for over a week to consider the different options.
The combination would create a communications powerhouse with annual sales of more than $80 billion, but is likely to face regulatory scrutiny in countries where the two overlap, such as Germany, Britain, and the Netherlands.
In Germany where Vodafone and Liberty compete in cable, competition regulators have taken a tough stance on combinations among cable companies.
It remains to be seen whether Vodafone will move ahead with making a bid for Liberty, or if it will seek an another way to bolster its UK fixed operation, such as renting lines or building more itself.
"Absolutely, they are watching developments but that doesn't mean they are going to pounce," said a fifth person.
Both Vodafone and Liberty Global declined to comment on Friday.
(Additional reporting by Leila Abboud and Sophie Sassard; Writing by Leila Abboud, editing by David Evans)