UPDATE 1-Vodafone hires bank for possible German cable bid
* Appoints Goldman Sachs to advise on options-source
* Kabel Deutschland hires Morgan Stanley, Perella-source
* Potential 10 bln deal would transform German telco market
* Vodafone looking at fixed assets in Europe
* German antitrust regulator would need to review deal
FRANKFURT, Feb 19 (Reuters) - Vodafone moved closer to a possible 10 billion-euro bid for German cable operator Kabel Deutschland by hiring long-time banker Goldman Sachs to advise on options, a person with direct knowledge of the matter told Reuters on Tuesday.
Kabel Deutschland, Germany's biggest cable company, has retained Morgan Stanley and advisory firm Perella Weinberg to defend its interests in the event of a Vodafone approach, a second person with direct knowledge said.
An acquisition would transform the German telecoms market, which has been one of the more resilient in a European sector plagued by deflation in prices and tough competition.
It would also be Vodafone's biggest deal since it entered India in 2007 and mark a change in strategy for the group that has long has owned largely mobile operations in continental Europe and relied on renting broadband lines from competitors.
Sector bankers and some analysts argue that Vodafone needs to acquire fixed assets to fight off challenges from low-cost mobile players and telecom and cable rivals pushing discounted, all-inclusive mobile and fixed bundles.
Vodafone could save around 300 million euros a year by relying less on Deutsche Telkom lines into consumers' homes and might also offload mobile traffic on to its own fixed network.
Vodafone is now neck and neck with Deutsche Telekom in terms of mobile market share, while it holds only 12 percent of the broadband market to Deutsche Telekom's around 40 percent.
Germany's cable operators, led by Liberty Global's Unity Media brand and Kabel Deutschland, hold about 13 percent of the broadband market and have been winning customers from Deutsche Telekom with cheaper prices and higher speeds.
Vodafone would boost its presence in its biggest European market in Europe by acquiring Kabel Deutschland but would need clearance from competition regulators who have blocked cable mergers over concerns about higher prices for consumers.
TELE COLUMBUS HITCH
On Tuesday, Kabel Deutschland said its agreement to buy fellow cable operator Tele Columbus for 618 million euros ($825 million) was at risk due to German antitrust concerns, opening the door for a counterbid from rivals.
UnityMedia has always said it would look at opportunities in the German market, but it may have to act fast as cable deals have become hot in recent weeks helped by easier access to financing on debt markets.
Deutsche Telekom has also in the past expressed interest in Tele Columbus.
Kabel Deutschland said late on Monday it had offered to sell Tele Columbus networks in Berlin, Dresden and Cottbus, but the compromise was viewed as insufficient by the German Federal Cartel Office (FCO).
"The FCO requires the divestment of approximately 60 percent of the Tele Columbus networks in Eastern Germany - twice as many as offered by Kabel Deutschland," Kabel Deutschland said in a statement.
Kabel Deutschland's network covers some 8 million households compared with 7.8 million for Liberty, which earlier this month struck a $15.7 billion deal to buy British cable group Virgin Media .
The German cartel office had no comment on a possible Vodafone bid for Kabel Deutschland.
Espirito Santo investment bank said a Vodafone deal for Kabel Deutschland would be less likely to run into antitrust issues.
"We do not believe the FCO's decision with respect to Tele Columbus closes the door to a move by Vodafone," wrote the analysts. "In our view the key difference between the situations is the ownership of the customer networks."
Vodafone's broadband business relies largely on renting lines from market leader Deutsche Telekom, while Tele Columbus has its own network in Eastern Germany.
Vodafone, Goldman Sachs, Morgan Stanley , Kabel Deutschland declined to comment. Perella was not immediately available for comment.