Swisscom definitely wants to buy Vodafone Italy for 8 billion
Published: Friday, Mar 15th 2024, 15:30
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Swisscom is pressing ahead with its expansion in Italy at a rapid pace: barely two weeks after confirming takeover negotiations with Vodafone Italia, the Swiss telecoms group has signed the purchase agreement. The Federal Council says "sì" to the billion-euro deal, but politicians continue to rail against it.
Swisscom intends to put a total of 8 billion euros on the table for Vodafone Italy, as the Swiss industry leader announced on Friday. The purchase will be financed entirely with debt.
Vodafone Italy is to be merged with the Milan-based Swisscom subsidiary Fastweb. This will create the second-largest telecoms provider in Italy behind the top dog TIM with a combined turnover of EUR 7.3 billion and a combined operating profit before depreciation and amortization (EBITDA) after leasing of EUR 2.4 billion.
Good addition
Vodafone Italy and Fastweb complement each other well: while Fastweb has a broadband network, Vodafone Italy contributes a mobile network. This allows the two companies to eliminate their respective weaknesses in the Italian telecoms market and save costs. Until now, Fastweb has had to rent capacity from other mobile providers for its mobile customers. Together, Fastweb and Vodafone have a market share of 31% in the fixed network and 26% in mobile telephony in Italy.
Fastweb mobile customers will now be able to make calls using the Vodafone mobile network in Italy. Conversely, Vodafone customers will be able to surf on Fastweb's broadband network. This will enable the joint company to offer customers bundled fixed and mobile services.
The merger of Fastweb and Vodafone Italy is expected to generate annual synergies of EUR 600 million from 2029, explained Group CEO Christoph Aeschlimann in conference calls. On the other hand, one-off costs of around 700 million euros will be incurred for the integration.
More dividend
The takeover will lead to a significant increase in value. This will please Swisscom shareholders and, above all, the federal treasury, as the federal government is the majority shareholder with just under 51%: the Swiss telecoms group intends to increase the dividend from CHF 22 to CHF 26 from 2026. The aim is to increase the dividend further in the following years. Aeschlimann did not want to say how large this increase might be.
This means that Swisscom will change from a majority Swiss group to a Swiss-Italian group. While the Swiss business previously accounted for almost three quarters of total Group revenue at 8.1 billion, it now only accounts for just over half.
Nevertheless, the Elefanten takeover will have no impact on the domestic market, said Group CEO Aeschlimann: "The focus on Switzerland remains high. The transaction will not change this." The network expansion targets, such as fiber optic coverage of 75 to 80 percent by 2030, remain unchanged. "We also do not expect any impact on employees in Switzerland."
The deal is expected to be completed in the first quarter of 2025, subject to regulatory approval. However, the approval of Swisscom shareholders is not required.
Approval from the federal government
Despite criticism of the deal from politicians, the Board of Directors unanimously approved the transaction, it was reported. This means that the representative of the federal government has also given the green light for the billion-euro purchase. The takeover does not conflict with the Federal Council's strategic goals for Swisscom, the government wrote.
The previous conditions also continue to apply: the Federal Council expects the Italian and Swiss businesses to remain organizationally and structurally separate. And Swisscom is still not allowed to take on any universal service contracts abroad.
"The Board of Directors of Swisscom has thoroughly and comprehensively examined the opportunities and risks of this transaction and is convinced that the opportunities for all parties involved far outweigh the risks of a transaction of this magnitude," explained Michael Rechsteiner, Chairman of the Board of Directors.
SVP: "Irresponsible"
The SVP once again voiced strong criticism: the federal government's ownership strategy "must include a ban on foreign adventures", the party wrote in a press release: companies with a de facto state guarantee should not carelessly put taxpayers' money at risk.
Swisscom has obviously learned nothing from the past, when it "lost billions" in Germany, Hungary and Malaysia. Getting involved abroad again is therefore "highly irresponsible", wrote the SVP.
However, the Federal Council intends to review the ownership strategy in the course of the year. This also includes a privatization or partial privatization of the company, the government wrote. The Syndicom trade union has already rejected privatization.
Shareholders, on the other hand, applauded: Swisscom shares had risen by 4.6 percent by early afternoon.
©Keystone/SDA
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