Vodafone rejects €10.5bn merger bid by French telecoms tycoon

VODAFONE has rejected an offer by billionaire telecoms tycoon Xavier Niel to merge their Italian operations in a €10.5bn (£9bn) deal.

Mr Niel’s Iliad Group last month tabled a proposal to combine their Italian businesses, arguing the move would help to build scale in an increasingly competitive market.

Following an initial approach, Iliad sweetened the deal by offering to hand an extra €100m in cash to Vodafone and give up a call option that would have allowed it to gain more control over the joint venture over time.

However, Iliad said Vodafone had “failed to accept” the offer, leading to a 4pc drop in the UK company’s share price. A spokesman for Vodafone added: “We said in December that we are exploring options with several parties in Italy. We are no longer in talks with Iliad, but our discussions with others continue.” One potential suitor that could still strike a deal with Vodafone in Italy is Fastweb, a mobile and broadband provider owned by Swisscom.

Under chief executive Margherita Della Valle, Vodafone has been slimming down its global operations in an effort to pay down debt and return to growth.

The telecoms giant has agreed a £15bn merger in the UK with Three. The deal, which will create the country’s largest mobile network operator, is being reviewed by competition regulators.

Other recent deals include the €5bn sale of its Spanish operations to Zegona Communications. Vodafone’s rejection in Italy will be a major setback for Mr Niel, a high-profile French businessman who is also a major investor in the newspaper Le Monde.

It comes two years after a previous €11bn takeover bid was rebuffed.

Iliad had argued that the merger would create the “most innovative challenger” in Italy, helping to accelerate the rollout of 5G and full-fibre broadband in the country.

Under the improved terms, Vodafone would have gained half the share capital of the combined entity, as well as €6.6bn in cash and a €2bn shareholder loan. Iliad Italia would have obtained the other half of the share capital, alongside a €400m cash payment and €2bn loan.

Iliad, which owns the Free telecoms brand in France and also operates in Poland, said it was confident the rejected proposal was its strongest possible offer.

The company said it will now pursue a stand-alone strategy in Italy and “fiercely pursue market share gains”.