News
French-based iliad has announced today that it has submitted a proposal to Vodafone to merge their Italian units, through the creation of a new entity named NewCo
Under the deal, Vodafone would receive a 50% share of the new entity, a cash payment of €6.5 billion and a shareholder loan of EUR 2.0 billion to ensure long-term alignment. This, iliad say, values Vodafone Italia at an estimated €10.45 billion.
The aim of the move, say Iliad in a press release, is to “establish an attractive market offering centred around innovation, growth, and unparalleled customer experience. This offer benefits from the unanimous support of iliad’s board of directors and its main shareholder Xavier Niel.”
The press release also states that the proposal has the full support of the iliad board of directors, as well as its majority shareholder, French billionaire Xavier Niel, who believe that the proposed deal would benefit from iliad’s “innovative approach to connectivity, affordability and digital inclusivity as well as the expertise of Vodafone in B2B”.
Last month, it was reported by Reuters that Vodafone CEO Margherita Della Valle was reviewing company operations in Italy, looking to cut down the company’s operations in order to reduce its mounting debt pile. It was reported that iliad were interested in the operations, “If there is consolidation in Italy, we want to participate actively,” said a company spokesperson back in November.
In a similar way to Spain, which is facing strong price wars, the Italian market is a victim of vicious price competition (mainly due to the entry of iliad into the market in 2018), which has led to a 21% fall in total revenue over the last decade, dropping to €27.1 billion.
Speaking on the state of the Italian market, Thomas Reynaud, Iliad Group CEO said, “The market context in Italy calls for the creation of the most innovative telecom challenger, with ability to compete and create value in a competitive environment.”
“We believe that the profiles and complementary expertise of iliad and Vodafone in Italy would allow us to build a strong operator with the ability and financial strength to invest for the long term. NewCo would be fully committed to accelerating the country’s digital transformation and especially fibre adoption and 5G deployment, with more than €4 billon of investment planned over the next 5 years.”
Last year, iliad put in a bid worth €11 billion to purchase Vodafone Italia in full, which was rejected by the board due to not being in the best interests of shareholders. However, this time, Vodafone have that they are supportive of market consolidation in these cases and although the transaction is not certain, an announcement will be made if progressions continue.
Shares in Vodafone rose by 6.6% upon the news today.
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