Vodafone Wraps Overhaul With €8 Billion Italy Deal, Buyback
Vodafone Wraps Overhaul With €8 Billion Italy Deal, Buyback · Bloomberg

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(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.

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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.”