Swisscom poses as a competitor to Iliad to buy Vodafone in Italy

Definitely nothing is going according to plan for Iliad in Italy. After an 11.25 billion euro takeover offer for Vodafone Italia, rejected in February 2022, the parent company of Free returned to the charge in mid-December. In order not to rob the British operator in search of a more balanced deal, it proposes this time to merge its transalpine activities with the Italian subsidiary of the latter.

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 a turnover of approximately 5.8 billion euros.

This handsome 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, is expected to present a competing offer in the coming days.

Better said, Swisscom would either offer a higher amount or settle the transaction price immediately.

Merger or sale?

To distinguish itself from the French group, Swisscom could also, according to the Italian daily, propose to set up a joint venture with Fastweb, which would allow Vodafone to keep a foothold on the Italian market. The joint alliance of Iliad is similar to an acquisition diluted over time, the agreement providing for the possibility for the latter to buy an additional 10% of the new group each year.

In the end, Iliad could acquire 100% of Vodafone Italia against a payment of approximately 8.5 billion euros, of which 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’s 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, who has held 2.5% of the capital since 2022.

Plagued by a stagnation in its turnover, Vodafone has been carrying out a vast asset disposal plan for several years, focusing on the 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 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 is TIM’s counterattack?

So Iliad or Fatsweb? It should be noted – the height of irony – that the Frenchman entered into a partnership with the Swiss at the time of his 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 rapprochement of Vodafone Italia with one or the other would not fundamentally change the situation, recalls Corriere Della Sera. If authorized by the competition authorities, it would reduce the number of operators on the Italian peninsula from five to four.

Which, according to the newspaper, would force the incumbent operator to react. Given its position in Italy, TIM (Telecom Italia Mobile) could be prevented from strengthening itself on the consumer market to set 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 full latitude to play the role of consolidator.

Photo credit: Vodafone Italia