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Vodafone to Sell Italy Unit to Swisscom for $8.7 Billion — 2nd Update

By Adria Calatayud


Vodafone Group agreed to sell its Italian business to Swisscom for 8 billion euros ($8.71 billion) in cash, completing the U.K. telecommunications company's restructuring of its European portfolio.

The deal looks set to reshape one of Europe's largest telecom markets by bringing together Vodafone Italia's mobile customer base with the fixed operations of the Swiss group's Fastweb Italian subsidiary.

Vodafone and Swisscom separately said Friday that they had reached an agreement that followed the their confirmation of talks in late February.

At 0943 GMT, Vodafone shares were 4.5% higher, while Swisscom traded 2.5% higher.

Vodafone said the sale of its Italian business marks the third and final step in an overhaul of its European portfolio launched in May under Chief Executive Margherita Della Valle, in a bid to reduce debt and streamline its operations.

Last year, the company struck separate deals to sell its Spanish business to Zegona Communications and to merge its U.K. operations with CK Hutchison Holdings' Three. The agreement with Swisscom came after Vodafone in late January said that it had turned down a bid for the unit from French billionaire Xavier Niel's Iliad Group.

"Our transactions in Italy and Spain will deliver EUR12 billion of upfront cash proceeds and we intend to return EUR4 billion to shareholders via buybacks, as part of our broader capital allocation review," Della Valle said.

Vodafone said it would halve its dividend for the year starting April 1 to 4.5 European cents a share. For the year to the end of March, the company reiterated its intention to pay out 9.0 European cents a share.

Before the recent large European deals, Vodafone had been taking steps to offload assets under pressure to bring down its debt pile and simplify its sprawling operations. As of Sept. 30, the company's net debt stood at EUR36.24 billion, down from EUR45.52 billion a year before.

The yearslong process leaves Vodafone with a slimmed-down portfolio which it said will be reorganized in five divisions--Germany, European markets, Africa, business and investments. Philippe Rogge, CEO of Vodafone Germany, will leave the group and Ahmed Essam will become executive chairman of Vodafone Germany and CEO of its European markets division, the company said. Essam was most recently U.K. CEO.

For Swisscom, the deal creates a converged operator in Italy--a telecom provider that offers an integrated blend of services--that the company said will allow it to tap into the growth opportunities it sees there.

The company, which will fund the deal with debt, said it expects to achieve annual synergies of around EUR600 million. Assuming the deal is completed in the first quarter of next year as expected, Swisscom said it would increase its dividend for 2025 to 26 Swiss francs ($29.42) a share from the CHF22.00 a share it paid out in recent years.

The deal is likely to face little opposition from antitrust authorities, Barclays analysts Maurice Patrick and Mathieu Robilliard said in a research note.


Write to Adria Calatayud at


(END) Dow Jones Newswires

March 15, 2024 06:20 ET (10:20 GMT)

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