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Swisscom signs purchase agreement for Vodafone Italy

Updated at 15 Mar 2024 7:30 am

Swisscom has finalized its billion-euro takeover in Italy. The largest Swiss telecommunications group has signed the purchase agreement for Vodafone Italy. Swisscom is putting 8 billion euros on the table for the mobile operator.

Vodafone Italy is to be merged with the Milan-based Swisscom subsidiary Fastweb, the "blue giant" announced in a press release on Friday. This will create the second-largest telecom provider in Italy behind the top dog TIM with a combined turnover of 7.3 billion euros and a combined operating profit before depreciation and amortization (EBITDA) after leasing of 2.4 billion euros. The deal had already been announced at the end of February.

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.

Fastweb's cell phone customers will now be able to make calls using the Vodafone mobile network in Italy. 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 synergies of 600 million euros per year.

More dividend

The takeover will lead to a significant increase in value. This will please Swisscom shareholders, and above all the federal treasury: the Swiss telecoms group intends to increase the dividend from CHF 22 to CHF 26 from 2026. The company is aiming for a further increase in the dividend in the coming years, it added.

The acquisition will be fully debt-financed, increasing Swisscom's leverage ratio to 2.6x net debt to EBITDA at the end of 2025. At the same time, the strong balance sheet will be maintained. "Swisscom expects to be able to maintain its corporate rating of 'A'", the Group wrote.

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

The deal had recently been criticized in the political arena. Nevertheless, 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 Swisscom Board of Directors 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. The takeover of Vodafone Italia is in line with the Federal Council's strategic objectives for Swisscom," explained Michael Rechsteiner, Chairman of the Board of Directors.

And Italy is not the end of the story: Swisscom and the Vodafone Group are also looking into a closer business relationship. In particular, this involves possible cooperation - also beyond Italy - in various areas such as IoT, business services and solutions, procurement, operational shared services and roaming.


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