Vodafone Group PLC has confirmed it is in early talks with John Malone’s Liberty Global PLC over a deal that may lead to asset sharing between the two companies. There has been chatter for months that Malone was eyeing Vodafone to further consolidate his European and international expansion. Speaking in May, Malone called Vodafone “a great fit” with his growing European cable empire, specifically citing the benefits of a merger the UK. Germany and the Netherlands. That led to Vodafone enjoying its highest share price in over a year.

Vodafone reps stressed that it was not in talks over a full merger with Liberty Global, actually sending its share price down by 1%. “Vodafone confirms that it is in the early stages of discussions with Liberty Global regarding a possible exchange of selected assets between the two companies. There is no certainty that any transaction will be agreed, nor is there certainty with respect to which assets will ultimately be involved,” said a Vodafone statement released this morning. “Vodafone is not in discussions with Liberty Global concerning a combination of the two companies.”

Liberty Global is the largest cable company in the world, with 27 million customers across 14 countries. Assets include Virgin Media, Unity Media and Ziggo. The company is looking to diversify its offering by owning more wireless assets so it can get into the quad play business: offering TV, landline phone, broadband Internet and wireless service.

Across Europe a wave of telco consolidation is taking place, which will have long-term and strategic ramifications on the media and content business. The likes of Telefonica, Vivendi and Telecom Italia have all been engaging in asset divestment or acquisition in recent months as the digital landscape continues to take shape. The entry by deep pocketed telcos into the content business, not to mention the arrival of SVOD disrupter Netflix into Europe, has already had an impact on more traditional media giants such as BSkyB, which completed its acquisition of Sky Italia and majority interest in Sky Deutschland in November last year to create a European TV giant – now called Sky Europe- in a deal worth nearly $11 billion. That move was partly fuelled by the importance of economies of scale and sheer commercial mass in today’s (and tomorrow’s) competitive market.

Malone’s Liberty Media is the largest shareholder in Charter Communications, which is finalising a deal to acquire Time Warner Cable.