The latest round of consolidation in the most competitive telecom markets in Europe will see Swisscom purchase Vodafone Italia for 8 billion euros ($8.7 billion) and merge the company with its Italian subsidiary Fastweb. This announcement was made on Friday.
The purchase comes after rival MasMovil and French mobile operator Orange merged their Spanish operations, which was authorized earlier this week, and after Vodafone sold its Spanish division to Zegona Communications in October of last year.
The Vodafone Italia acquisition will be paid for with debt and cash, according to Swisscom, which is under government control.
Following the Italian transaction and the sale of its Spanish business, Vodafone announced that it will return 4 billion euros in capital to shareholders and cut its dividend in half, to 4.5 euro cents per share, starting with its 2025 fiscal year.
Swisscom's shares increased 1.8% on the Zurich exchange, while its shares rose 3.2% in London.
With a dominant position in the highly sought-after business sector and a dominant position in mobile, the Swisscom acquisition will establish Italy as the country's second-largest fixed-line broadband provider, after TIM.
It occurs at a time when operators have had difficulty turning a profit on capital in recent years and Swisscom, the leading company in Switzerland, has suffered with nearly stagnant revenue growth.
Given Swisscom's extensive history in Italy and the country's "flattish" development, CEO Christoph Aeschlimann said the acquisition made strategic sense.
"We are in the Italian market in 17 years so this is a next step... reinforcing our position in the market where we are very successful," he told reporters. "I am 100% convinced that this transaction strengthens Swisscom as a whole." While he stated the company will prioritize integrating Vodafone Italia first, he did not rule out future deals.
According to Aeschlimann, Bern, which owns a 51% interest, supported Swisscom's decision.
The Swiss government stated that it will examine its ownership strategy for Swisscom throughout 2024 and that this process "includes issues of privatization or partial privatization of the company," though it did not provide further information.
Swisscom aims to save 600 million euros a year, mostly through the migration of Fastweb mobile clients to the Vodafone network.
It is anticipated that the purchase would close in the first quarter of 2025 and won't go to a vote among shareholders.
Following her decision to sell its Spanish business and combine its British division with Hutchison's Three last year, Margherita Della Valle, CEO of Vodafone, stated that the agreement marked the third and last significant step in restructuring the company's European portfolio. Della Valle, who began her Vodafone career in Italy, is hoping to accomplish what her predecessor was unable to do: increase Vodafone's profitability through big partnerships.
