Clearly nothing is going as planned for Iliad in Italy. After a takeover offer of 11.25 billion euros for Vodafone Italia, rejected in February 2022, the parent company of Free returned to the charge in mid-December. To avoid undermining the British operator in search of a more balanced deal, this time it is proposing to merge its transalpine activities with the latter’s Italian subsidiary.
In the joint alliance envisaged by Iliad, Vodafone would obtain 50% of the share capital of the new entity as well as a cash payment of 6.5 billion euros and a shareholder loan of 2 billion euros. According to Iliad, the combined entity is expected to generate revenue of around €5.8 billion.
This beautiful financial mechanic could be called into question by a third actor. According to Corriere Della Sera, the Swiss group Swisscom, owner of the Italian operator Fastweb, should present a competing offer in the coming days.
Better, Swisscom would either offer a higher amount or immediately pay the transaction price.
Merger or sale?
To distinguish itself from the French group, Swisscom could also, according to the Italian daily, propose setting up a joint venture with Fastweb, which would allow Vodafone to keep a foothold on the Italian market. Iliad’s joint alliance is similar to an acquisition diluted over time, the agreement providing for the possibility for the latter to purchase an additional 10% of the new group each year.
Ultimately, Iliad could acquire 100% of Vodafone Italia for a payment of around 8.5 billion euros, including 6.5 billion euros immediately and 1.95 billion euros with the gradual increase in capital. Which would value the Italian company in total at 10.45 billion euros.
In any case, Iliad’s proposal would be considered by Vodafone management as a starting point for possible negotiations. Whether it is a merger or a sale, the British operator intends to make the most of this operation to satisfy its shareholders, including… Xavier Niel, founder of Iliad, which holds 2.5 % of capital since 2022.
Facing stagnation in its turnover, Vodafone has been carrying out a vast asset disposal plan for several years, focusing on countries where it has a critical size. The group led by Margherita Della Valle has already merged its domestic activities with the operator Three, belonging to the Hong Kong conglomerate CK Hutchison, giving birth to the number 1 mobile operator in the United Kingdom. At the end of October, Vodafone announced the sale of its Spanish subsidiary to the Zegona fund for 5 billion euros.
What counterattack from TIM?
So Iliad or Fatsweb? It will be noted – the height of irony – that the French established a partnership with the Swiss at the time of its establishment in Italy, at the beginning of 2022, in order to borrow the latter’s fiber optic network. From an industrial point of view, the merger of Vodafone Italia with one or the other would not fundamentally change the situation, recalls Le Corriere Della Sera. If approved by competition authorities, it would reduce the number of operators on the Italian peninsula from five to four.
Which would force, according to the newspaper, the historic operator to react. Given its position in Italy, TIM (Telecom Italia Mobile) could be prevented from strengthening its position in the consumer market and setting its sights on BtoB operators.
Once the sale of its fixed network to the American investment fund KKR for 22 billion euros has been finalized, TIM will have complete freedom to play the role of consolidator.
Photo credit: Vodafone Italia