Vodafone Group PLC on Friday said it has agreed to sell its Italian business to Swisscom AG for €8 billion and will return half of the proceeds to shareholders.

The Berkshire, England-based telecommunications provider late last month had confirmed it was in exclusive talks with its Bern, Switzerland-based peer to sell the operations in Italy. This was after Vodafone in late January turned down a merger proposal for Italy from France’s Iliad SA.

Vodafone on Friday said it will receive €8 billion in upfront cash from Swisscom. It will return €4 billion of this as a share buyback in the new financial year.

However, Vodafone said it will rebase its annual dividend to 4.5 euro cents per share from financial year 2025 onward, reduced from the current level of 9.0 cents. Vodafone’s financial year ends on March 31. It paid a 4.50 euro cents interim dividend for the current year and confirmed on Friday that the full-year payout for financial 2024 will stay at 9.00 cents.

Vodafone noted that the Italian sale follows a similar disposal of its Spanish arm, raising €12 billion in total.

‘Today, I am announcing the third and final step in the reshaping of our European operations,’ said Chief Executive Margherita Della Valle.

‘Going forward, our businesses will be operating in growing telco markets - where we hold strong positions - enabling us to deliver predictable, stronger growth in Europe. This will be coupled with our acceleration in B2B, as we continue to take share in an expanding digital services market.’

Swisscom said the acquisition will be fully debt-financed. It will combine Vodafone Italia with its own Italian subsidiary, Fastweb, which it had acquired in 2007. It expects to be able to achieve €600 million in annual run-rate cost savings from the combination of the two.

‘The industrial logic of this merger is very strong,’ said Swisscom CEO Christoph Aeschlimann. ‘Fastweb and Vodafone Italia are an ideal fit to create high added value for all stakeholders.’

Chair Michael Rechsteiner added: ‘The Swisscom board of directors has thoroughly and comprehensively assessed the opportunities and risks of this transaction and has come to the firm conclusion that the opportunities for all stakeholders by far outweigh the risks inherent in a transaction of this size.’

Copyright 2024 Alliance News Ltd. All Rights Reserved.