Vodafone offloads Italian business to Swiss rival for €8bn

VODAFONE will offload its Italian business to a Swiss rival for €8bn (£6.8bn) as the struggling telecoms giant continues to slim down operations.

Confirmation of an agreement with Swisscom was announced by Vodafone yesterday morning, as the company said it would return proceeds from the sale to investors through a share buyback.

As part of the deal, Vodafone will continue to provide services to Swisscom for up to five years, with an annual charge of roughly €350m.

The two companies said they were also exploring a closer commercial relationship outside Italy.

Swisscom, which is majority-owned by the Swiss government, is the largest telecoms company in Switzerland.

It also operates in Italy through the mobile and broadband firm Fastweb.

Vodafone said the deal marked the final step in the reshaping of its European operations after the €5bn sale of its Spanish operations to Zegona. Bosses said the deals would create a combined €12bn in cash proceeds.

This has enabled the launch of a €4bn share buyback, with an option to buy back a further €2bn after the Italy deal is completed. However, Vodafone will also halve its dividend to 4.5 cents per share from next year.

Under Margherita Della Valle, its chief executive, Vodafone has looked to trim its sprawling business and return to growth.

The telecoms giant has inked a £15bn deal with Three to create the UK’s largest mobile network, though this faces regulatory scrutiny on both competition and national security grounds. But it is still struggling to turn around its fortunes in Germany, its largest market.

Vodafone said it will restructure the group into five business divisions. As part of this overhaul, Philippe Rogge, Vodafone Germany boss, will step down. Karen Egan at Enders Analysis said: “The company is highlighting how well it is positioned to grow now without Italy and Spain, and with the prospect of a better position in the UK.

“Germany is more important than ever, and the jury is still out on that turnaround.”

Vodafone said the deal with Swisscom is subject to regulatory clearance and approval from its shareholders.

It has agreed that if shareholders do not approve the deal and it enters into an alternative transaction within 12 months, it will pay Swisscom a break fee of €150m.

Ms Della Valle said: “The sale of Vodafone Italy to Swisscom creates significant value for Vodafone and ensures the business maintains its leading position in Italy.

“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.”

Vodafone also announced that Max Taylor will become UK chief executive.