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The Italian telecommunications market is about to witness a significant turning point with the announcement of exclusive negotiations between Swisscom and Vodafone for the purchase of Vodafone Italia. This €8 billion move marks a crucial milestone not only for the two companies involved but also for the entire industry in Italy.
The context of the acquisition
Swisscom, the leading Swiss telecommunications operator, is in advanced negotiations to acquire 100 per cent of Vodafone Italia. The intention is to merge Vodafone Italia with Fastweb, its Italian subsidiary, to create a leading operator in the mobile and fixed telecommunications market. This transaction is seen as a key strategy for Swisscom to increase its value and cash flow, while maintaining a corporate rating of at least ‘A’ and having a positive impact on its dividend policy.
Potential impacts and benefits
The merger between Vodafone Italia and Fastweb aims to create an operator with complementary mobile and fixed-line structures, skills and capabilities, positioning itself as an important challenger in the market. With combined sales of around EUR 7 billion per year, the merger would represent a significant player in the Italian telecommunications landscape, second only to TIM in fixed broadband and among the leaders in the mobile segment.
The transaction is subject to approval by local and European regulatory authorities. However, it is believed that regulators may be less inclined to intervene since, even after the agreement, Italy would retain four mobile operators, thus avoiding a reduction to three operators, often seen as a red line for possible mergers.
Strategies and future developments
Vodafone CEO Margherita Della Valle expressed her intention to improve Vodafone’s profitability through significant deals, restructuring problematic markets where the company was not generating returns on capital. This move follows Vodafone’s rejection of a joint venture proposal with Iliad, favouring instead Swisscom’s offer for its larger cash component.
The deal with Swisscom is seen by Vodafone as the best option for value creation, offering immediate cash proceeds and transaction certainty. On the other hand, Swisscom sees this merger as a key step towards long-term value creation in Italy, in line with the strategic objectives of the Swiss Federal Council, which holds a majority stake in Swisscom.
Conclusion
The planned acquisition of Vodafone Italia by Swisscom represents a significant strategic move that could reshape the Italian telecommunications landscape, creating a powerful, integrated operator capable of competing effectively in one of Europe’s most difficult markets. With the aim of completing the deal by the end of 2024, the industry awaits the future developments of this important merger with interest.
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