Vodafone Group to divest Italian business in US$8.71b deal with Swisscom
Vodafone Group Plc (LSE: VOD) has announced it will divest its subsidiary Vodafone Italy to Switzerland-based telco Swisscom AG.
The US$8.71 billion transaction follows an extended period of engagement with several companies to explore market consolidation options in Italy.
It comes hot on the heels of Vodafone Spain’s divestment in October to Zegona Communications plc and is reported to be the final step in a “portfolio right-sizing” which will see Vodafone Group reshape its European footprint to focus on markets with strong positions and local scale.
The Swisscom deal represents a valuation for Vodafone Italy of approximately 26 times its consensus operating free cash flow for financial year 2024 and 7.6 times its consensus adjusted EBITDA-aL (interest, tax, depreciation and amortisation, after leases).
The new capital allocation framework includes a dividend to be re-based at US$0.045 per share from financial year 2025; a US$4.35 billion return via share buybacks; and a new leverage range up to a multiple of 2.75.
It values Vodafone Italy at the highest operating free cash flow multiple of any Vodafone market transaction over the last 10 years and will provide the group with a full exit from Italy.
Terms of the deal
Under the terms of the deal, Vodafone Group will continue to provide certain services to Swisscom for up to five years, for a first-year fee of US$381 million.
Approximately US$191 million will reflect charges currently reported below Vodafone Italy’s segmental adjusted EBITDA-aL.
The transaction is conditional on certain regulatory approvals including clearance by the Italian Competition Authority.
It does not require the approval of Swisscom shareholders.
Vodafone and Swisscom are also reported to be exploring a closer commercial relationship to enable collaboration in areas such as Internet of Things, enterprise services and solutions, procurement, operational shared services and roaming.
Final step
Vodafone Group chief executive officer Margherita Della Valle said divesting Vodafone Italy was the final step of a re-shaping strategy.
“The sale of Vodafone Italy to Swisscom creates significant value for us and ensures the business maintains its leading position in Italy,” she said.
“Going forward, our businesses will be operating in growing telco markets where we hold strong positions, enabling us to deliver predictable, stronger growth in Europe.”
UK merger
Ms Della Vale is also spearheading a proposed merger with Three in the UK to create the nation’s largest mobile phone operator.
The deal is currently with the UK’s Competition and Markets Authority to determine if the transaction should proceed or if it should be subject to a more detailed Phase 2 investigation on competition grounds.