Vodafone Group Plc (NASDAQ:VOD) (LON:VOD) is pursuing acquisition of Kabel Deutschland. The German cable operator has already rejected the British telecom giant’s initial offer of 7.2 billion euro ($9.6 billion), people familiar with the matter told Kate Holton and Peter Maushagen of Reuters. Vodafone has long been speculated to make a move for Kabel Deutschland, which is the biggest cable operator in the biggest European market.

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Vodafone’s Quad Play Ambition

The acquisition will help Vodafone Group Plc (NASDAQ:VOD) (LON:VOD) meet the rising customer demand for “quad play”, which means broadband, mobile, television and fixed line services from one provider. Last week, Vodafone sent an email letter to Kabel Deutschland, expressing its interest in the company and offering 81 euros per share. The offer price was a 10 percent premium to Kabel Deutschland’s closing price last Friday. The German cable operator rejected the bid, saying the offer was too low. However, talks between the two companies were amicable, indicating further discussions were likely.

A Kabel Deutschland shareholder told Reuters that the offer must be above 90 euros a share, which will value the German company at about 8 billion euros. If the deal materializes, it will be the biggest for Vodafone Group Plc (NASDAQ:VOD) (LON:VOD) since 2007. It will help the world’s second largest telecom operator better compete with mobile operators that are aggressively slashing prices, and Liberty Global Plc (NASDAQ:LBTYA), which is on an acquisition spree. Analysts estimate that Liberty could make a counter bid for Kabel Deutschland.

Earlier this year, Vodafone Group Plc (NASDAQ:VOD) (LON:VOD) CEO Vittorio Colao said that he can afford to do big ticket deals in Europe without selling his prized asset. Vodafone owns a 45 percent stake in Verizon Wireless, with Verizon Communications Inc. (NYSE:VZ) holding the rest. Verizon has proposed to buy Vodafone’s stake for about $115 billion, but the British company has rejected the offer.

Synergies from the Acquisition

Morning News Equity Research said in a research report that there will be three types of synergies from the merger. One, revenues through quad play offers. Two, operating expenses, especially in IT and distribution network. Three, capital expenditure in the network as Vodafone Group Plc (NASDAQ:VOD) (LON:VOD) already owns a large fixed line network in Germany which was earlier known as Arcor. Excluding integration costs and revenue synergies, analysts expect synergies of 325 million euro a year, which is limited given the size of the group.

American shares of Vodafone Group Plc (NASDAQ:VOD) (LON:VOD) were down 0.28 percent to $28.04 at 9:40 AM EDT.