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Vestager says in-market consolidation is possible when competition is protected; 21.8bn transaction expected to close during Q4.
As expected, the European Commission on Thursday gave the go-ahead for 3 Italia and Wind’s €21.8 billion merger, paving the way for the creation of Italy’s biggest mobile operator and Iliad’s arrival in the country.
The combined entity will boast around 31 million mobile customers and 2.8 million fixed-line customers. Its joint 2015 revenue was €6.25 billion. The companies expect the deal to generate savings of €5 billion, which will help them to invest as much as €7 billion in infrastructure.
"Today is a good day for businesses and consumers across Italy. This joint venture will unlock major investment in Italy’s digital infrastructure, creating a telecoms company with the scale and strength to offer world-leading telecoms services with greater reliability, coverage and speed," said Canning Fok, co-managing director of 3 Italia parent CK Hutchison.
"The merger will create a leading and financially solid mobile operator in Italy that will benefit from substantial synergies," added Jean-Yves Charlier, CEO of Wind parent VimpelCom.
It is just over a year since CK Hutchison and VimpelCom agreed to combine their Italian operations into a 50:50 joint venture, reducing the number of players to three from four. The deal was subject to an in-depth European Commission review due to concerns about its impact on competition.
To win over Brussels, Hutch and VimpelCom offered to divest assets sufficient to facilitate the entry of a new fourth player. That new fourth player emerged in July when France-based Iliad agreed to acquire spectrum and base stations from the merged entity.
"We can approve the deal because Hutchison and VimpelCom have offered a strong remedy that enables a new mobile network operator, Iliad, to enter the Italian market," said the EU’s competition commissioner Margrethe Vestager, in a statement on Thursday.
Other recent European telco M&As – such as 3UK’s proposed acquisition of local rival O2, and Telenor and Telia’s plans to merge in Denmark – did not pass muster with Vestager, who has been keen to safeguard consumer choice and competition during her tenure.
Consequently, before Hutch and VimpelCom struck their deal with Iliad, there were doubts over whether the 3 Italia/Wind deal would get Brussels’ blessing.
"This case shows that telecom companies in Europe can grow by consolidation within the same country, provided effective competition is preserved. It also shows they can grow by cross-border expansion, such as Iliad in this case," Vestager said.
3 Italia and Wind’s plan to form a joint venture still has to be approved by local regulators. The deal is expected to close in the fourth quarter of 2016.
