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Swisscom buys Vodafone Italia for 8 billion

Vodafone will return 4,000 million through share buybacks after earning 12,000 million with its sales in Spain and Italy.

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Swisscom buys Vodafone Italia for 8 billion

Vodafone will return 4,000 million through share buybacks after earning 12,000 million with its sales in Spain and Italy


The Swiss telecommunications operator Swisscom has signed a binding agreement with Vodafone Group in relation to the acquisition of 100% of Vodafone Italia for 8 billion euros with the aim of merging it with Fastweb, its subsidiary in the transalpine country, as confirmed by the companies. , which expect to complete the transaction in the first quarter of 2025.

Swisscom has indicated that the consideration for the purchase will be 100% cash and will be financed entirely with debt, adding that the merger of Vodafone Italia and Fastweb will offer greater scale and a more efficient cost structure, with the expectation of annual synergies of around 600 million euros.

"The transaction is a key step for Swisscom to achieve its strategic objective of profitable growth in Italy," added the Swiss firm, which has expressed its intention to increase the annual dividend corresponding to the 2025 financial year to 26 Swiss francs per share, with the ambition for further dividend growth thereafter supported by the realization of synergies.

"The industrial logic of this merger is very strong," said Christoph Aeschlimann, CEO of Swisscom, for whom Fastweb and Vodafone Italia fit perfectly to create high added value for all interested parties.

"The acquisition of Vodafone Italia also meets the strategic objectives of the Federal Council for Swisscom. With full conviction that the decision is in the interests of Swisscom and Switzerland as a whole, the board of directors approved the transaction unanimously," noted Michael Rechsteiner , chairman of the board of directors of Swisscom, in which the Swiss Government controls more than half of the share capital.

For her part, the CEO of Vodafone Group, Margherita Della Valle, has indicated that, by uniting Vodafone Italia and Fastweb, it allows the creation of a strong convergent telecommunications company, well positioned to compete in the Italian market. "We are opening up the opportunity to establish a broader commercial partnership between Swisscom and Vodafone," she added.

In this sense, Vodafone has explained that, as part of the transaction, the operators agreed that Vodafone will continue to provide certain services to Swisscom for up to five years, specifying that the annual charge for said services that Swisscom will pay to Vodafone during the first year after Its completion is estimated at approximately 350 million euros.

Likewise, Vodafone and Swisscom are also exploring a closer commercial relationship to enable collaboration in a wide range of areas, beyond Italy, including IoT, business services and solutions, acquisitions, shared operational services and roaming, in line with the strategy of Vodafone to market its shared operations and expand its partnerships.

Like Swisscom's board of directors, Vodafone's board has also unanimously approved the transaction, which is conditional on certain regulatory approvals, including clearance from Italian Competition.

Vodafone has further agreed that, if Vodafone shareholder approval is required and the transaction is not approved at such general meeting, and Vodafone subsequently reaches an agreement for an alternative transaction involving Vodafone Italia within the next 12 months, Vodafone will pay Swisscom compensation of 150 million euros.

In this way, Swisscom finally acquires Vodafone's business in Italy, over whose purchase it had been in exclusive negotiations since the end of February, after the British operator rejected in January the acquisition proposal of Iliad, an operator controlled by the French magnate Xavier Niel.

In this sense, the British company has highlighted that, after the sale of Vodafone Italia and Vodafone Spain, together with the merger of Vodafone UK and Three UK, Vodafone will now focus its operations in Europe on growing markets, where it maintains solid positions with good scale. local. Also in the short term, it expects this will result in an increase in the Vodafone Group's ROCE of more than 1 percentage point.

"In the future, our businesses will operate in growing telecommunications markets, where we maintain solid positions, which will allow us to achieve stronger and more predictable growth in Europe," said Margherita Della Valle, underlining that the sale of Vodafone Italia to Swisscom creates significant value for Vodafone and ensures the business maintains its leading position in Italy.

In this way, Della Valle has highlighted that the transactions in Italy and Spain will generate 12,000 million euros of initial cash proceeds and has announced that Vodafone intends to return 4,000 million euros to shareholders through buybacks.

In this sense, Vodafone's board has approved the return of capital through share buybacks of up to €2 billion from the sale of Vodafone Spain, noting that it foresees the opportunity to carry out more share buybacks of up to €2 billion once once the sale of Vodafone Italia is completed.

As such, total shareholder returns for FY25 are expected to be up to €3.1 billion, representing €1.1 billion in ordinary dividend payments and up to €2 billion in share buybacks, which which would be a 23% increase over the expected total shareholder return for FY24 of €2.5 billion.

Likewise, Vodafone's board has expressed its intention to keep the final FY24 dividend in line with the previous year at 4.5 cents per share and has announced that, following the adjustment of the portfolio size as a result of the transactions , has decided to adopt a new "rebased" dividend from FY25 onwards.

Specifically, the board is targeting a dividend of 4.5 cents per share for FY25, with ambitions to increase this over time.

On the other hand, Vodafone has announced that, from April 1, 2024, the majority of its core operations will begin to move to a fully commercial model in order to better serve its own markets and telecoms partners (such as Swisscom in Italy and Zegona in Spain).

This program is expected to be completed in FY25 and will allow the company to respond flexibly and efficiently to changes in demand.

"We are opening our platforms and services to third parties, offering them the opportunity to access our shared operations, such as procurement, roaming, IoT and other commercial platforms," ​​he indicated.

Likewise, starting April 1, Vodafone will also undertake changes in its organization to better execute strategic priorities within the new structure.

In this way, Vodafone will be organized into five commercial divisions: Germany; European Markets; Africa; Vodafone Business; and Vodafone Investments.

Consequently, the structure of the executive committee of the Vodafone Group will change and, in this context, Philippe Rogge will step down from his position as CEO of Vodafone Germany and leave Vodafone.