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Swisscom’s €8bn Acquisition of Vodafone Italia

By Carlo Leopardi, Tommaso Arona, Alina Shaikh, Edoardo Tosti, and Alexander Svanidze (Boston University), Ahaan Roychowdhury, Diti Shah, Krish Raj, Shyam Patra, Dimos Kamposioras (UCL)

Photo: rivage (Unsplash)


Overview of the deal

Acquirer: Swisscom

Target: Vodafone Italy

Total Transaction Size: $8.7 Billion

Announcement date: March 15th 2024

Target advisor: UBS (financial), Slaughter and May, ADVANT NCTM (legal)

Acquirer advisor: Evercore, Deutsche Bank AG and JPMorgan Chase & Co

The Italian government has approved Swisscom's €8 billion acquisition of Vodafone Italy, which was unconditionally cleared under the golden power legislation. This legislation allows the government to review and impose conditions on significant transactions. Swisscom expects the deal, which will merge Vodafone Italy with Swisscom's subsidiary Fastweb, to close in the first quarter of 2025, subject to further regulatory approvals. The merger will create Italy's second-largest telecom company, combining Fastweb's 3.4 million customers with Vodafone's 20 million. The acquisition will be financed with debt and paid in cash. Vodafone's CEO highlighted that the merger will strengthen their position in growing telecom markets and accelerate their B2B expansion.

“By bringing together Vodafone Italia and Fastweb, we are enabling the creation of a strong converged telco, well positioned to compete in the Italian market. And we are opening the opportunity to establish a broader commercial partnership between Swisscom and Vodafone.” - Margherita Della Valle, CEO Vodafone Group

Company Details (Acquirer - Swisscom)

Swisscom is the leading ICT company in Switzerland and offers mobile, Internet and TV, as well as comprehensive IT and digital services to private and business customers. Swisscom is the most sustainable telecommunications company in the world and is 51% owned by the Swiss Confederation.

Founded in 1998, headquartered in Bern, Switzerland 

CEO: Christoph Aeschlimann

Number of employees: 19.729

Market Cap: $28.6bn

EV: $29.9bn

LTM Revenue: $12.3bn

LTM EBITDA: $4.24bn

LTM EV/Revenue: 2.47x


Company Details (Target - Vodafone Italia)

Vodafone Italia is a subsidiary of Vodafone Group PLC and operates in the telecommunications sector in Italy. It provides a range of services including mobile and broadband internet, data services, and various other digital communication solutions targeted at both consumer and business segments. Vodafone Italia focuses on expanding 5G networks across urban and rural areas to provide high-speed connectivity. 

Founded in 2002, headquartered in Milan, Italy

CEO: Aldo Bisio

Number of employees: ~5,733 

Market Cap: $6.789bn 

EV: €8bn 

LTM Revenue: €4.579bn

LTM EBITDA: €153 million

LTM EV/Revenue: 1.75x

LTM Adj. Pre-Synergies EV/EBITDAal: 7.8x

Projections and Assumptions

Short-term consequences

Swisscom’s decision to merge Fastweb and Vodafone Italia will combine 3.4 million Fastweb customers with Vodafone's 20 million, making it the second biggest telco in Italy. The new company will have a significant opportunity to cross-sell Fastweb’s fixed services to Vodafone’s large mobile customer base. The presence of a big fixed–mobile operator will make it more difficult for competitors such as Iliad (current price-disruptor operator) to attract new customers. As a result, enable  Fastweb–Vodafone for a strong position in the business segment and a leading player in mobile.

The increased scale, more efficient cost structure and significant annual run-rate synergies of EUR around 600 million will enable the combined entity to unlock significant value for all stakeholders, sustain investments in the Italian telecommunication market and offer innovative, competitively priced converged services, improving performance and user experience for customers across all market segments.

Moreover, Fastweb will be able to build a larger portfolio of IT and communication services for B2B customers. It already has a prominent position in the wholesale connectivity segment thanks to its large proprietary fixed network. The greater scale provided by the acquisition will allow Fastweb to better cater for large organisations and the public administration sector.

To add, the company announced plans to return €4 billion to shareholders through buybacks and to reduce its dividend to 4.5 cents per share starting next year, down from 9 cents per share in the fiscal year ending March 2023.

Long-term Upsides

Swisscom’s acquisition of Vodafone Italia is going to boost the company’s profitability and market share in the Italian market, with the ultimate goal of increasing the company’s dividends while retaining it’s A-range credit rating. Since the 100% acquisition of Fastweb in 2007, Swisscom has highly benefited from the Italian telecommunications market, growing its subsidiary by over 50% in terms of customers, revenues and EBITDA. Despite this, M&A movements in the market, like the merger between operators Wind and Tre in 2016 and the ongoing negotiations between KKR and Tim’s shareholders to close a delisting deal, have lead Swisscom to boost its position merging Fastweb and Vodafone. Furthermore, to facilitate the integration, the combined entity will benefit from a brand licence agreement, which permits the use of the Vodafone brand in Italy for up to 5 years after closing. 

Long-term consequences of the deal are most-likely going to benefit the Swiss company as it has an opportunity to further penetrate the Italian telecommunications market, where 40% of it is controlled by Tim, while simultaneously avoiding a price war which could decrease profit margins for both companies. The M&A transaction also further diversifies Swisscom’s revenue streams, who is often criticised from a risk management perspective to be too concentrated on the relatively small Swiss market instead of looking for opportunities in the larger EU market.

Risks and Uncertainties


Italian Telecom Landscape: The telecommunications sector in Italy is highly competitive and has been facing pricing pressures and a shrinking free cash flow pool. As mentioned in the analyst report provided by Swisscom, the presence of aggressive competitors like Iliad, which has disrupted market pricing since its entry, could further stress the combined entity's market positioning and profitability.

Market Integration: Integrating Vodafone Italia with Fastweb presents significant challenges. Both companies operate in overlapping markets with potentially different operational practices and corporate cultures. Efficiently merging these operations without disrupting ongoing services or alienating existing customer bases can be difficult. Swisscom will have to be very careful in its approach and consider the difference in its customer base and their loyalties, harmonising their services, and developing a well constructed brand strategy for both companies. 

The Debt Problem: Considering that the acquisition is an all debt deal, Swisscom will have to be very careful. While Swisscom executives seem to have a very optimistic view on deleveraging, any mismanagement of the merger can lead to a variety of problems. Such a large increase in debt can make it difficult for Swisscom to borrow money in the future and any mishandling of debt repayments can also downgrade their credit rating. Lastly, with the recent economic downturn, lowering liquidity to service debt repayments could seriously hurt the company in the event of any problems that could arise from the ongoing inflation, rise in interest rates, and drop in consumer confidence.



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