Swisscom announced its intention to acquire Vodafone Italia for a whopping €8 billion, on Friday. The acquisition will lead to a merger with its Italian subsidiary, Fastweb, making it Italy’s second-largest fixed-line broadband operator, following TIM. The combined entity will also be a key player in the mobile space.
Despite competition from other interested bidders, such as the owner of Eir, Iliad, Swisscom emerged victorious. The transaction will be completely financed through debt and will consist of an all-cash deal, according to Swisscom. This convergence of Vodafone Italia and Fastweb, with their distinct mobile and fixed infrastructures, skills, and potentials, as Swisscom puts it, is set to shape a prominent converged competitor in a market ripe with growth opportunities.
The deal is expected to reach a conclusion in the first quarter of 2025 and won’t necessitate a vote from shareholders. Swisscom, under the primary control of the Swiss government, has been active in the Italian market since 2007 through Fastweb, observing an increase in the business by half, in terms of revenue and customers, over the past decade.
Swisscom’s CEO, Christoph Aeschlimann, expressed his enthusiasm about the merger and believes it will be a milestone in achieving Swisscom’s objective of lucrative growth in Italy. The transaction marks an eventful year for Vodafone CEO Margherita Della Valle, who is committed to addressing Vodafone’s issue of zero return on its capital in three problematic markets.
Previously, she agreed to the sale of Vodafone’s Spanish operations and the merger of its UK unit with Hutchison’s Three. Last month, Swisscom stated that this deal would enhance its cash flow and have an incrementally positive effect on its dividend policy.
At present, Hutchison’s Wind Tre’s network is used by Fastweb for mobile services, and a deal exists between the two for the establishment of 5G networks. Della Valle, who kickstarted her career with Vodafone in Italy, aims to augment Vodafone’s profitability by brokering significant deals, something her predecessor failed to do.
The reaction from investors towards these deals has been ambivalent, as Vodafone’s shares are currently trading at about half the value they held two years ago. ($1 = 0.9194 euros). (Contribution by John Revill, revision by Linda Pasquini and Kim Coghill)