Vodafone has announced its intention to sell its Italian branch to Swisscom for a total of €8 billion in cash, signaling a significant shift in the telecom landscape. This revelation came on Wednesday, following intense speculation in the media regarding such a transaction. The two companies have entered into exclusive discussions concerning Vodafone Italy, though a definitive agreement has yet to be finalized.
The proposed sale would assign Vodafone’s Italian operations an enterprise value of €8 billion, considering both cash and debt. This valuation is based on approximately 26 times the anticipated operating free cash flow of Vodafone Italy for the current fiscal year, along with 7.6 times its adjusted EBITDAaL.
Vodafone has left open the possibility of price adjustments and has cautioned that the deal might still fall through. However, the detailed nature of the current discussions suggests a strong likelihood of the sale proceeding.
This move comes after Vodafone declined an offer from Iliad, which had proposed creating a joint venture that valued Vodafone Italy at €10.45 billion, involving €6.5 billion in cash along with a €2 billion shareholder loan. The Swisscom deal, offering more upfront cash, reflects Vodafone’s preference for exiting the Italian market amidst fierce competition and the potential for a smoother regulatory approval process.
Vodafone has been exploring options for market consolidation in Italy, seeking to maximize shareholder value and ensure transaction certainty. The anticipated Swisscom acquisition appears to fulfill these criteria, promising less regulatory resistance than a merger with Iliad might have faced, given concerns over market competition.
Swisscom intends to merge Vodafone Italy with its Italian subsidiary, Fastweb, a move expected to encounter minimal regulatory challenges due to Fastweb’s limited presence in the mobile market and the similar market shares of the two companies in the fixed broadband sector.
As discussions progress towards a conclusive agreement, the proposed transaction is poised to reshape the telecommunications industry in Italy, marking the end of Vodafone’s operations in the country and potentially setting a new competitive dynamic in the market.
