Vodafone to shrink again as it agrees £6.8bn offload of Italian division
Vodafone has taken the next step in a radical restructuring of the group, agreeing to offload the Italian arm of the company in a multi-billion deal.
Vodafone has agreed to sell its operations in the Mediterranean country to Swisscom for 8bn euros (£6.8bn), subject to “customary closing adjustments.”
The struggling telecoms firm is being shrunk by new CEO Margherita Della Valle, who marked her first results call with the City last year by admitting the firm’s performance had not been good enough.
The all-cash transaction represents just shy of an 8-times EBITDA multiple.
The deal was announced to markets this morning after press speculation overnight.
Vodafone’s share price rose by more than 3.5 per cent after the open to 70.84p, just before 9am.
Late last year Vodafone also ditched its Spanish division to Zegona in a £3bn-plus deal, as Della Valle pursues a radical simplification of the company which has been hit by a combination of internal issues as well as wider telecoms market headwinds.
Italian and Spanish markets have dragged on Vodafone for years and the offloads will allow the firm to focus on turning around performance in Germany and a renewed push in the UK.
Vodafone will merge with CK Hutchinson’s Three in the UK, subject to regulatory clearance, a move it says will improve competition in the market by creating three, not two, major telecoms outfits.
Della Valle has also announced a rolling programme of 11,000 job cuts as part of plans to revive the firm’s performance and share price.
“To consistently deliver, Vodafone must change,” she said.
“My priorities are customers, simplicity and growth. We will simplify our organisation, cutting out complexity to regain our competitiveness.”
Bullish analysts are hoping the radical geographical simplification will mirror the success of Aviva’s Amanda Blanc, who has done similar and delivered what most agree is a better business as a result.
A Vodafone spokesperson said: “Vodafone’s CEO, Margherita Della Valle has said that there are three markets that need to consolidate becausewe are not able to earn a return on our cost of capital. We have already announced a merger in the UK and the sale of our Spanish business. The proposed transaction in Italy would mark the completion of those portfolio changes.”