Britain's Vodafone sells Italian arm to Swisscom for $8.7 billion

Britain's Vodafone Group has announced the sale of its Italian operations to Swisscom, the Switzerland-based telecom operator, for €8 billion ($8.7 billion).

This sale, confirmed on Friday, is part of Vodafone's broader plan to streamline its portfolio and focus on markets where it can ensure profitable growth.

Following the sale, Vodafone plans to return half of the proceeds, amounting to €4 billion, directly to its shareholders through a comprehensive share buyback.

Margherita Della Valle, Vodafone's chief executive, highlighted the transaction as the “final step in the reshaping of our European operations”, emphasising the company's aim to operate in growing telecoms markets where it holds strong positions.

This move is seen as a focus on areas offering predictable and robust growth in Europe.

“Vodafone’s Italian business has been struggling, so shedding this weight should help the group refocus,” said Sophie Lund-Yates, lead equity analyst at stockbrokers Hargreaves Lansdown.

“Attention will now turn to how effectively Vodafone uses its resources to fix wider challenges, including high debts, costs and some increasing competition. ”

Swisscom intends to finance the purchase through new debt and merge Vodafone Italia with its Italian subsidiary, Fastweb, attempting to unlock significant savings and provide enhanced services in Italy.

The sale agreement also includes an arrangement where Vodafone will continue to provide certain services to Swisscom over the next five years, with an initial annual charge of €350 million, anticipated to decrease over time.

Both companies are exploring a closer commercial relationship, which may enable collaboration across areas beyond Italy.

Vodafone has previously sold its Spanish operations and is in the process of merging its UK business with Three UK, aiming to create Britain's largest mobile phone network.

The transaction has been well-received in the market, with Vodafone's shares closing 5.7 per cent higher in London.

Swisscom's shares rose 4.9 per cent in Zurich, indicating positive investor sentiment regarding the deal's potential benefits for both companies.

Swisscom's chief executive Christoph Aeschlimann expressed enthusiasm about the merger's “industrial logic”.

“Fastweb and Vodafone Italia are an ideal fit to create high added value for all stakeholders,” he said.

The combined operation is expected to sustain investments and offer improved services, addressing the competitive challenges in the Italian telecom market.

Despite the divestment and the focus on reshaping its European operations, Vodafone faces challenges, including high debts and increasing competition in its remaining markets.

The sale of Vodafone Italia to Swisscom is expected to be completed by the end of the first quarter of 2025, marking a milestone in Vodafone's overhaul and its commitment to focusing on core markets and improving shareholder returns.