Britain's Vodafone confirms sale of Italian arm to Swisscom for $8.7bn
LONDON: British cellphone company Vodafone confirmed on Friday that it is selling its Italian business to Switzerland's Swisscom for 8 billion euros ($8.7 billion) and will return half of the proceeds to its shareholders through a share buyback.
Vodafone stated that the move, with discussions first announced on February 28, represented an "attractive valuation" and marked the final step in its strategy to divest parts of its European portfolio.
Swisscom, a telecoms operator, will pay in cash, which it will finance through new debt. It aims to merge its acquisition with Fastweb, the company's subsidiary in Italy. It said the deal will help it unlock 600 million euros in savings and will enable the combined entity to sustain investments and offer improved services.
"The industrial logic of this merger is very strong," said Swisscom CEO Christoph Aeschlimann. "Fastweb and Vodafone Italia are an ideal fit to create high added value for all stakeholders."
As part of the deal, which is expected to be completed by the end of the first quarter of 2025, the two firms agreed that Vodafone will continue to provide "certain services" to Swisscom over the next five years. Swisscom will pay annual initial charges of 350 million euros, which is expected to decrease over time.
Vodafone added that the two companies are also "exploring a closer commercial relationship to enable collaboration across a broad range of areas, beyond Italy."
Vodafone Chief Executive Margherita Della Valle said the sale "creates significant value for Vodafone and ensures the business maintains its leading position in Italy."
Vodafone has been looking to free up cash and improve its financial performance by selling off parts of the business, including its Spanish arm, having previously struck deals to sell its divisions in Hungary and Ghana.
The markets appeared to welcome the deal, with Vodafone's shares closing 5.7% higher in London and Swisscom's ending 4.9% up in Zurich.
"Vodafone's Italian business has been struggling, so shedding this weight should help the group refocus," said Sophie Lund-Yates, lead equity analyst at stockbrokers Hargreaves Lansdown. "Attention will now turn to how effectively Vodafone uses its resources to fix wider challenges, including high debts, costs and some increasing competition."
Its refreshed strategy also has seen it seek to merge its UK business with Three UK to create Britain's biggest mobile phone network worth around £15 billion ($19 billion). The proposed tie-up will face regulatory scrutiny over competition concerns.
By RSS/AP
