Vodafone Wraps Overhaul With €8 Billion Italy Deal, Buyback
(Bloomberg) — Vodafone Group Plc struck an €8 billion ($8.7 billion) deal to sell its Italian business to Swisscom AG, bringing to a close a years-long divestment effort and setting the stage for a shake-up of the fiercely competitive Italian market.
Swisscom will merge Vodafone Italia with its Fastweb SpA 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.
Chief Executive Officer Margherita Della Valle, who formally took the reigns last year, has sold off underperforming markets and worked to scale back a sprawling empire that at one point stretched from the US to Africa. Europe’s telecom carriers have struggled in recent years with heavy competition and regulation, which have hurt returns and inspired more dealmaking.
Combined with Vodafone’s recent Spanish unit sale, the company said it will get about €12 billion in cash and plans to buy back €4 billion in stock. The company also said it would cut its dividend in half to 4.5 cents per share beginning in fiscal 2025.
Vodafone shares rose 4.8% to 69.28 pence in London trading at 2:15 p.m. Swisscom rose 4.6% to 527 Swiss francs in Zurich.
The deal may challenge former phone monopoly Telecom Italia SpA, which recently sold off its landline network and is struggling to convince investors of its growth potential. Combined, Fastweb and Vodafone Italia will be a formidable competitor for enterprise services, one of the few segments growing in Italy and a key source of revenue for Telecom Italia.
A transaction is also unlikely to improve competition in the mobile market, according to Claudio Campanini, Europe head for telecommunications, media and technology at Kearney. French billionaire Xavier Niel’s Iliad SA, which helped spark and Italian price war when it entered the market in 2018, had also tried to buy the Vodafone business and was rebuffed.
Read More: Niel Says Vodafone ‘Has a Problem’ in Italian Market
The deal will “have a small impact on competitive dynamics for fixed line services and basically zero impact for mobile services,” Campanini said in an interview. “If you want to really change Italy’s telecom industry, you need to consolidate Iliad.”
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.”
She had agreed to sell Vodafone Spain in October and is planning to merge the company’s UK business with CK Hutchison Holdings Ltd. That leaves Vodafone with three major markets: Germany, Africa and the rest of Europe, Della Valle said in a call with reporters on Friday.
Under the company’s buyback plan, Vodafone will repurchase about €2 billion in shares this year after the Spanish deal closes and another €2 billion once the Italian transaction is wrapped up.
“One thing that is certain is that Margherita Della Valle has delivered on the deal front having taken over as CEO less than a year ago,” Enders Analysis analyst Karen Egan said in a note on Friday. “If she can deliver on a change in structure and culture to the benefit of the operational performance as convincingly as she has done with dealmaking, then the Vodafone story really could start a very promising new chapter.”
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 Bastian Benrath and Clara Hernanz Lizarraga.
(Updates with additional details, analyst comment throughout.)
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