Vodafone in talks to sell Italian business to Swisscom

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Vodafone said it was in talks to sell its Italian business to Swisscom in a deal that would value the unit at €8bn, as chief executive Margherita Della Valle continues her attempts to simplify the telecoms group.

The London-listed company said on Wednesday that a sale to Swisscom would deliver “the best combination of value creation, upfront cash proceeds and transaction certainty for Vodafone shareholders”.

After taking over, Della Valle set out her objective to pursue deals in markets where returns were below their cost of capital and has since announced a proposed merger in the UK and the sale of Vodafone Spain.

The disclosure of the negotiations with Swisscom comes after French billionaire Xavier Niel’s telecoms company Iliad in January said Vodafone had rejected its proposal to merge their Italian businesses.

In a separate statement, Swisscom said it intended to merge Vodafone Italia with Fastweb, its subsidiary in Italy. Both companies said there was no certainty that any transaction would be agreed.

The proposed deal with Swisscom could have a much higher degree of certainty over completion, as it is expected to be reviewed only by Italian authorities, according to a person familiar with Vodafone’s thinking. A merger with Iliad was believed to fall under the remit of Brussels’ regulator, making it potentially more challenging.

Swisscom would pay cash in a deal that would value the Italian business at €8bn on an enterprise basis. The deal with Iliad would have provided the company with €6.6bn in cash and a shareholder loan of €2bn. It valued Vodafone Italia at €10.45bn.

Swisscom said the planned combination of the businesses would “bring together complementary high-quality mobile and fixed infrastructures, competencies and capabilities to create a leading converged challenger”.

It added “increased scale, more efficient cost structure and significant synergy potential” would enable it to unlock value for stakeholders.

Vodafone company veteran Della Valle became chief executive on an interim basis in January last year and was made permanent in April after previously being chief financial officer.

This month she said the company’s transactions in the UK and Spain were “progressing well”.

The UK competition regulator in January launched a formal probe into its plans to merge its domestic business with CK Hutchison-owned Three UK.

Vodafone in October also agreed to sell its Spanish business for up to €5bn to Zegona Communications, a fund founded by two former Virgin Media executives.