Iliad Proposes Merger with Vodafone Italy in Multi-Billion Euro Deal

Iliad, a prominent telecommunications company, revealed on Monday its ambitious proposal to merge its Italian business with Vodafone. This strategic move, unanimously supported by Iliad’s board of directors, aims to create a powerhouse in the Italian telecom sector.
Vodafone Italy broadband plansIn a formal news statement, Iliad outlined the potential financial impact of the merger, projecting a combined revenue of approximately 5.8 billion euros ($6.34 billion) and an estimated EBITDA of about 1.6 billion euros by the end of the fiscal year ending March 2024.

Vodafone in a statement said the telecom giant is supportive of in-market consolidation in countries where it is not achieving appropriate returns on invested capital and confirms it is exploring options with several parties to achieve this in Italy, including through a merger or a disposal.

There can be no certainty that any transaction will ultimately be agreed. If required, a further announcement will be made when appropriate, Vodafone said.

The proposal entails Vodafone acquiring a 50 percent stake in the newly merged entity. To ensure long-term alignment, Iliad offered a substantial cash payment of 6.5 billion euros alongside a shareholder loan of 2.0 billion euros to Vodafone as part of the agreement.

This development follows Iliad’s unsuccessful attempt last year to purchase Vodafone Italy outright for 11.25 billion euros, an offer that was turned down by Vodafone at the time. However, this latest joint-venture proposal suggests a more favorable earnings multiple of 7.8 times compared to the previous bid of 7.1 times, Reuters news report said.

Vodafone, having recently expressed intentions to explore options for its Italian operations, considers this proposal against the backdrop of potential collaboration with Swisscom’s Italian unit, Fastweb, as per recent reports.

The financial landscape of Vodafone Italy, detailed in the first half of the fiscal year 2023-24, portrays a nuanced performance. While the company reported a decline in total revenue by 2.4 percent to €2.3 billion, attributed to lower service and equipment revenue, certain segments experienced notable shifts.

Vodafone Italy’s mobile service revenue faced a 5.1 percent decline, primarily due to intensified price competition in the value segment. However, a quarterly improvement was noted, driven by seasonal growth in roaming and visitor revenue, alongside strategic pricing initiatives.

Meanwhile, Vodafone Italy’s fixed service revenue surged by 8.0 percent, propelled by robust demand in connectivity and digital services, particularly through initiatives linked to the EU Recovery and Resilience Facility.

Despite a decline in the broadband customer base due to market dynamics, Vodafone Italy saw an addition of 26,000 fixed-wireless access customers. Vodafone Italy also expanded its next-generation network services, now available to approximately 23.6 million households, leveraging partnerships and advanced connectivity technologies.