Vodafone agrees €8 billion sale of Italian business to Swisscom, merging with Fastweb SpA

Vodafone Group Plc has reached an agreement to sell its Italian business to Swisscom AG for €8 billion ($8.7 billion) in cash. As part of the move to streamline operations and bolster its lagging share price, Vodafone will also initiate a €4 billion stock buyback.

The deal involves Swisscom merging Vodafone Italia with its subsidiary Fastweb SpA Italy, with an anticipated closing in the first quarter of 2025, according to a statement released Friday, confirming an earlier report by Bloomberg. Switzerland’s government, which holds the majority stake in Swisscom, expressed separate support for the transaction.

Margherita Della Valle, Vodafone’s Chief Executive Officer since April, has been under pressure to address the declining share price and sell or merge underperforming units. This includes the Italian business, which has faced stiff competition and lower consumer pricing compared to other markets. Della Valle has also agreed to sell Vodafone Spain and is in the process of merging the company’s UK business with CK Hutchison Holdings Ltd.

In a statement, Della Valle described the sale as the “final step in the reshaping of our European operations,” adding, “Our businesses will be operating in growing telco markets – where we hold strong positions – enabling us to deliver predictable, stronger growth in Europe.”

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Vodafone Italia and Fastweb are respectively the second and fourth-largest operators in Italy, boasting combined annual sales of about €7 billion. Italy represents approximately 11% of Vodafone’s revenue and stands as its largest market following Germany and the UK.

Swisscom successfully outbid a proposal from French billionaire Xavier Niel’s company, Iliad SA. Iliad made its entry into Italy in 2018 with cost-effective mobile plans, sparking a price war. Vodafone had previously rejected Iliad’s offer to merge for €6.6 billion in cash. Telecom operators across Europe have been grappling with diminishing returns on investment, exacerbated by the European Union’s stringent competition regulations which mandate four large players in most markets, in contrast to the more loosely regulated US market with typically three major competitors.

Analysts, such as Claudio Campanini, Europe head for telecommunications, media, and technology at advisory firm Kearney, have suggested that a deal with Iliad might have been preferable due to the ongoing competitive threat from Niel’s company.

“The combination of Fastweb and Vodafone in Italy is expected to yield substantial synergies for investors but is likely to have a limited impact on the competitive landscape for fixed-line services and essentially no impact on mobile service competitiveness in the country,” Campanini remarked in a phone interview on Friday. “If the goal is to truly transform Italy’s telecom industry, addressing the Iliad would be necessary.”

Evercore Inc. acted as the lead financial adviser to Swisscom, which also enlisted the help of Deutsche Bank AG and JPMorgan Chase & Co. Deutsche Bank, ING Groep NV, and UniCredit SpA are the lead underwriters for debt financing. UBS Group AG served as the sole financial adviser to Vodafone.