Wed, Feb 28th 2024
Swisscom is planning an 8 billion euro takeover of Vodafone Italia to merge with Fastweb, enhancing its European presence.
Swisscom is planning a massive takeover in Italy. The Swiss telecoms group wants to buy the mobile provider Vodafone Italia for 8 billion euros and merge it with its Milan-based broadband subsidiary, Fastweb.
The rumor has been circulating in the media since December, and now Swisscom is making it official. According to a press release on Wednesday, it is in exclusive talks about a possible purchase of Vodafone Italy. A 100% takeover of Vodafone Italia shares in cash is being planned.
This would create the second-largest telecoms provider in Italy behind industry leader TIM. Vodafone Italy employed around 5,700 people as of March last year, and Fastweb a good 3,000 by the end of 2023.
The Swisscom subsidiary Fastweb contributed CHF 2.6 billion in the last financial year, just under a quarter of Swisscom’s total turnover of over CHF 11 billion. On the other hand, Vodafone Italy recently achieved a turnover of just under 4.4 billion euros. The combined company is likely to generate just under CHF 7 billion in sales.
At 8.1 billion, Swisscom’s Swiss business recently accounted for almost three-quarters of total revenue. If the merger takes place, the Swiss business would then account for just over 50 percent of sales and the Italian business for just under 50 percent.
Swisscom took over Fastweb in 2007. The Swiss telecoms group hoped this would provide growth opportunities, as the Swiss market was already very saturated at the time.
Fastweb only offered broadband from the outset and had to buy mobile telephony. This is now set to change with Vodafone’s takeover.
Fastweb is strong in fixed networks, while Vodafone is vital in mobile telephony. Swisscom expects a takeover to bring “economies of scale, more efficient cost structures, and considerable synergy potential.” The merger will also allow Swisscom to offer bundled packages for the broadband network and mobile telephony in Italy.
According to the press release, there are only a few overlaps between the two companies. Swisscom also emphasized that such a takeover would positively impact Swisscom’s dividend and cash flow.
It is currently still unclear whether a transaction will actually take place. However, negotiations are at an advanced stage. According to well-informed sources, the takeover is planned for this year.
Vodafone has wanted to sell its Italian business for a while now. The company supports “the consolidation of the market in countries where the company does not achieve an appropriate return on invested capital,” according to a Vodafone press release from December.
According to the Group, this also applies to Italy, which is why the business there is to be sold or merged. However, the establishment of a joint venture with French competitor Iliad in Italy recently failed due to differing price expectations.
For the time being, the announcement did not trigger any storms of enthusiasm on the stock exchange. Swisscom shares were down -0.4 percent to CHF 508.20 just under an hour after the start of trading, while the market as a whole was up 0.5 percent.
The merger with Vodafone Italy offers considerable cost synergy potential and should support a market shakeout in the medium term, according to a commentary by Bank Vontobel. However, it is unlikely that the acquisition will positively impact Swisscom’s dividend policy in the short term “given the debt burden and the integration efforts.”
©Keystone/SDA
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