(Bloomberg) — Vodafone Group Plc has agreed to sell its Italian business to Swisscom AG for €8 billion ($8.7 billion) in cash and said it will buy back €4 billion in stock as the company seeks to streamline its operations and boost its lagging share price.
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Swisscom will merge Vodafone Italia with its Fastweb SpA Italy subsidiary, and the deal is expected to close in the first quarter of 2025, the companies said in a statement Friday, confirming an earlier Bloomberg report. Switzerland’s government, which is the controlling shareholder in Swisscom, said separately that it supports the deal.
Vodafone Chief Executive Officer Margherita Della Valle, who took the top job in April, has faced a declining share price and pressure to sell or merge underperforming units. That includes the Italian business, which has been struggling with heavy competition and consumer prices in the country a fraction of what carriers can charge in other markets. Della Valle also agreed to sell Vodafone Spain and is planning to merge the company’s UK business with CK Hutchison Holdings Ltd.
Della Valle called the sale the “final step in the reshaping of our European operations,” in the statement. “Our businesses will be operating in growing telco markets – where we hold strong positions – enabling us to deliver predictable, stronger growth in Europe.”
Vodafone shares rose 3.6% to 68.45 pence in London trading at 8:13 a.m. Swisscom was little changed at 503.80 Swiss francs in Zurich.
Vodafone Italia and Fastweb are the country’s second- and fourth-biggest operators, respectively, with combined sales of about €7 billion annually. Italy accounts about 11% of Vodafone’s revenue and is its largest market after Germany and the UK.
Swisscom fended off a rival bid from French billionaire Xavier Niel. Niel’s Iliad SA entered Italy in 2018 with cheaper, no-frills mobile plans, helping to spark a price war. Vodafone had rejected Iliad’s proposal to merge in a deal for €6.6 billion in cash. Telecom operators across Europe have been struggling with declining return on investment as the European Union’s competition watchdogs enforced a strategy that means four large players compete in most markets, compared with three in less strictly regulated countries like the US.
Some analysts, including Claudio Campanini, Europe head for telecommunications, media and technology at advisory firm Kearney, have said that a deal with Iliad may have been preferable because of the competitive threat that Niel’s company still poses.
“The combination between Fastweb and Vodafone in Italy is expected to generate solid synergies for companies’ investors but have a small impact on competitive dynamics for fixed line services and basically zero impact for mobile services competitiveness in the country,” Campanini said in a phone interview on Friday. “If you want to really change Italy’s telecom industry, you need to consolidate Iliad.”
Evercore Inc. served as lead financial adviser to Swisscom, which is also working with Deutsche Bank AG and JPMorgan Chase & Co. Deutsche Bank, ING Groep NV and UniCredit SpA are lead underwriters of the debt financing. UBS Group AG was sole financial adviser to Vodafone.
–With assistance from Edwin Chan, Paula Doenecke and Bastian Benrath.
(Updates with share move in fifth paragraph)
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