London (AFP) – British telecoms giant Vodafone said Wednesday it was in advanced talks to sell its Italian unit to Switzerland’s Swisscom after rejecting offers from French billionaire Xavier Niel’s Iliad group.
The full terms of the transaction have yet to be defined but the companies put a preliminary price of eight billion euros ($8.7 billion) on the potential deal.
Shares in Vodafone, which has been on a cost-cutting campaign that has included layoffs and the offloading of divisions abroad, rose following the announcement but ended lower.
The disclosure of the negotiations with Swisscom comes a month after the British mobile phone operator rejected an Iliad offer to merge their Italian units.
Vodafone said in a statement that it had “engaged extensively with several parties to explore market consolidation in Italy”.
The potential transaction with Swisscom “delivers the best combination of value creation, upfront cash proceeds and transaction certainty for Vodafone shareholders”, it added.
The two companies, however, cautioned in separate statements that there was no certainty the transaction would ultimately be agreed.
The acquisition of Vodafone Italy would be on a cash and debt-free basis, the companies said.
A source close to the matter told AFP that Vodafone preferred a deal with the Swiss group because of its “significant cash element” and a higher degree of certainty that the deal could be completed, as it would have a better chance of being approved by Italian regulators.
Swisscom said it would merge Vodafone Italy with its own Italian unit, Fastweb.
Last month, Vodafone rejected a proposal from Iliad to merge their Italian businesses in a deal valuing Vodafone Italy at 10.45 billion euros.
The British mobile phone operator had already rebuffed an 11.25-billion-euro approach by Iliad and private equity group Apax Partners in February 2022.
Niel has since taken a 2.5-percent stake in Vodafone.
– Job cuts –
Vodafone reported earlier this month that its third-quarter revenues fell 2.3 percent to 11.4 billion euros on poor performances across Italy and Spain.
In late 2023, Vodafone’s chief executive Margherita Della Valle announced the sale of its Spanish division to investment fund Zegona for up to five billion euros.
It followed her decision last year to axe 11,000 jobs, or more than 10 percent of Vodafone’s global workforce, to slash costs.
Britain’s competition regulator, meanwhile, is investigating Vodafone’s plan to merge its British mobile phone operations with those of Three UK, owned by Hong Kong-based CK Hutchison.
Vodafone also completed the sale of its Hungarian unit last year.
“The telecoms group has been stuck in the mud for a long time, trying to revive growth and reignite a spark in the business,” said Russ Mould, investment director at investment platform AJ Bell.
“Work to streamline the group has already involved various deals but the market is still not convinced Vodafone has found the magic solution judging by its share price performance over the past five years,” he said.
“The Italian deal, if successful, is a step in the right direction but only one small piece of the puzzle,” he added.
Vodafone shares closed down 0.2 percent on London’s benchmark FTSE 100 index, which finished 0.8 percent lower overall.
Susannah Streeter, head of money and markets at investment platform Hargreaves Lansdown, noted that the proposed transaction would follow “hot on the heels” of Vodafone’s sale of its Spanish business.
“This is part of Vodafone’s evolving strategy to improve its performance against its peers,” Streeter said.
“But low sales growth relative to spending is still set to weigh on the company even as it offloads underperforming divisions,” she said.
© 2024 AFP
