Vodafone Group is actively exploring merger or disposal options for its Italian business, Vodafone Italia, as part of its ongoing efforts to streamline and optimize its portfolio for growth. This comes in response to the recent announcement by Iliad Group, a European telecom company, proposing a merger of their respective Italian businesses. The deal values Vodafone Italia at a significant €10.45 billion ($11.38 billion).
Vodafone has expressed its support for in-market consolidation in countries where it is not achieving satisfactory returns on invested capital. Consequently, the telecommunication giant is currently engaged in discussions with several potential partners to explore opportunities for consolidation in Italy. However, it is important to note that there is no certainty that a deal will be reached.
As part of its portfolio right-sizing strategy, Vodafone has already initiated the sale of its Spanish unit and merged its operations in the United Kingdom under the joint venture Vodafone U.K. and Three U.K.
Iliad’s proposal for a new jointly owned company, combining its Italian business with Vodafone Italia, has gained the support of both Iliad’s board and its main shareholder, Xavier Niel. The proposal outlines that Vodafone would receive €6.5 billion in cash and a €2.0 billion shareholder loan. In return, Vodafone’s share of the newly formed business would be valued at approximately €1.95 billion.
Under this arrangement, Iliad would receive €500 million in cash and a €2.0 billion shareholder loan. It would also have the option to purchase 10% of the joint venture from Vodafone annually, at an agreed price determined at the time.
The merged entity is projected to generate revenue of €5.8 billion and earnings before interest, taxes, depreciation, and amortization after leases of €1.6 billion for the fiscal year ending in March 2024.
Vodafone’s shares have experienced a significant boost as a result of these recent developments, rising by 6.7% to 69.08 pence as of 1029 GMT. However, it is worth noting that the shares are still down by 18% year-to-date.
