Hutchison Whampoa and Vimpelcom have agreed to merge their Italian telecoms businesses in a deal valued at €21.8 billion.
After months of speculation and an indication earlier this week that a deal was imminent, the pair made the announcement on Thursday, noting that the combination of Wind and 3 Italia would create a stronger competitor with 31 million mobile customers.
"This joint venture will give the combined business the scale and strength to offer Italian consumers and businesses a state of the art network with greater 4G coverage and higher speeds," said Canning Fok, managing director of 3 Italia’s parent company CK Hutchison.
Jean-Yves Charlier, CEO of Vimpelcom, expressed similar sentiments.
"The two entities will become a leading operator in Europe’s fourth largest telecoms m arket, delivering a convergent player that will accelerate the ability to invest in the network, services and digital innovations," he said.
The parent companies will combine their Italian businesses into a 50:50 joint venture. Valuing Wind at €13.9 billion and 3 Italia at €7.9 billion, the companies said the total deal value comes in at €21.8 billion, making it one of the largest M&A deals in Italy since 2007.
The companies did not comment on the likely brand name of the new entity.
The firms said that together they have more than 31 million mobile customers and 2.8 million fixed-line customers, of which 2.2 million are fixed broadband subscribers.
Those figures mean the merged entity is likely bigger than incumbent TIM in the mobile space – it had 30.1 million customers at the end of March, and is due to report mid-year figures on Friday – but it remains some way behind in the fixed-line market.
Wind and 3 Italia’s combined revenues in 2014 came in at €6.4 billion. The business is expected to generate capex and opex benefits with a net present value, less integration costs, in excess of €5 billion, the operators said.
Wind CEO Maximo Ibarra will serve as the chief executive of the combined company , while 3 Italia CEO Vincenzo Novari will become senior adviser for Italy to CK Hutchison and will serve as a CK Hutchison nominee on the joint venture’s board. There will be six board members in total, three nominated by each parent company. The firms said the role of chairman will pass back and forth between them every 18 months.
Dina Ravera, 3 Italia’s COO, will lead the merger integration process and will remain in a senior operating role in the combined business. Stefano Invernizzi, current CFO of 3 Italia, will become CFO of the combined business.
The deal requires regulatory approvals, including the go-ahead from the European Commission. The telcos said they expect to close the merger wit hin 12 months.
