Vodafone in advanced talks to sell Italian arm in £6.8bn deal

Mobile phone giant Vodafone has confirmed talks to sell its Italian business to Switzerland’s Swisscom in a deal worth 8 billion euros (£6.8 billion).

The pair said they are in advanced exclusive discussions, with the proposed agreed price on a cash basis and including debts, although the full terms of the deal are yet to be finalised.

Vodafone said: “Vodafone has engaged extensively with several parties to explore market consolidation in Italy and believes this potential transaction delivers the best combination of value creation, upfront cash proceeds and transaction certainty for Vodafone shareholders.”

It comes after FTSE 100-listed Vodafone rebuffed attempts by France’s Iliad to merge the two firms’ Italian businesses, which would have created the country’s biggest mobile phone company.

Vodafone and Iliad had revealed the talks in December last year.

The Iliad proposal valued Vodafone Italy at 10.45 billion euros (£8.9 billion), and Iliad Italy at 4.45 billion euros (£3.8 billion)

Vodafone would have gained half of the share capital of the combined group, as well as a 6.5 billion euro (£5.6 billion) cash payment and a 2 billion euro (£1.7 billion) shareholder loan.

Swisscom said it plans to merge Vodafone Italia with its business in the country, called Fastweb.

Swisscom said: “The planned merger of Vodafone Italia and Fastweb would bring together complementary high-quality mobile and fixed infrastructures, competencies, and capabilities to create a leading converged challenger.

“The increased scale, more efficient cost structure and significant synergy potential would enable the combined entity to unlock value for all stakeholders.”

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 Hungarian and Ghanaian divisions.

It is also merging its UK business with Three UK to create Britain’s biggest mobile phone network worth £15 billion.

The proposed merger of the networks is set to be formally investigated by the UK’s competition regulator over concerns it could substantially reduce options for mobile customers, but Vodafone is hoping to complete the tie-up by the end of the year.

It is also planning to cut about 11,000 jobs over three years as part of efforts to simplify the global business, which could affect markets worldwide. About a third of the role reductions had already been completed by January this year.

In a recent trading update for the final three months of 2023, Vodafone said total worldwide revenues grew by 4.2% year-on-year on an organic basis – the firm’s preferred sales measure. However, reported sales dipped by 2.3%.

In the UK, service revenue increased by 5.2%, but it was a less positive picture for Vodafone’s biggest market, Germany, where service revenue crept up by just 0.3%.