Swisscom wants to become number two in Italy

The rumor has been circulating in the media since December, and now Swisscom is making it official: according to a press release on Wednesday, it is in exclusive talks about a possible purchase of Vodafone Italy. A 100% takeover of the shares of Vodafone Italia in cash is planned, according to the statement.

This would create the second-largest telecoms provider in Italy behind industry leader TIM - and an enormously large employer: Vodafone Italy employed around 5,700 people as of March last year, Fastweb a good 3,000 by the end of 2023.

7 billion joint turnover

It would be a "transformative" change for Swisscom, according to initial assessments by analysts. The Swisscom subsidiary Fastweb contributed CHF 2.6 billion in the last financial year, just under a quarter of Swisscom's total turnover of over CHF 11 billion. Vodafone Italy, on the other hand, recently achieved a turnover of just under 4.4 billion euros. The combined company is therefore likely to generate sales of just under CHF 7 billion.

At 8.1 billion, Swisscom's Swiss business recently accounted for almost three quarters of total revenue. If this business were now offset by Italian sales of 7 billion, then the share would move strongly in the direction of half and half, i.e. the Swiss business would then account for just over 50 percent of sales and the Italian business for just under 50 percent. Swisscom would therefore be transformed from a predominantly Swiss group into an Italian-Swiss group.

Important addition

Swisscom took over Fastweb in 2007. The Swiss telecoms group hoped that this would provide opportunities for growth, as the Swiss market was already very saturated at the time. However, Fastweb only offered broadband from the outset and had to buy in mobile telephony. This is now set to change with the takeover of Vodafone.

Fastweb and Vodafone Italy would complement each other well, according to the press release. Fastweb is strong in the fixed network, while Vodafone is strong in mobile telephony. Swisscom expects the takeover to bring "economies of scale, more efficient cost structures and considerable synergy potential". The merger will also give Swisscom the opportunity to offer bundled packages for the broadband network and mobile telephony in Italy. With such offers, the Swiss company will be able to increase customer loyalty.

According to the press release, there are only a few overlaps between the two companies. Swisscom also emphasized that such a takeover would have a positive impact on Swisscom's dividend and cash flow.

However, the deal has not yet been signed and sealed. It is currently still unclear whether a transaction will actually take place. However, negotiations are at an advanced stage. According to well-informed sources, the takeover is planned for this year.

Vodafone speaks of "best combination"

Vodafone has wanted to sell its Italian business for a while now. The company supports "the consolidation of the market in countries where the company does not achieve an appropriate return on invested capital", according to a Vodafone press release from December. According to the Group, this also applies to Italy, which is why the business there is to be sold or merged. Most recently, however, the establishment of a joint venture with French competitor Iliad in Italy failed due to differing price expectations.

The British parent company of Vodafone Italia has now spoken out again and also confirmed the talks with Swisscom. It is of the opinion that "this potential transaction represents the best combination of value creation, upfront cash proceeds and transaction security", according to the press release.

No enthusiasm on the stock market

For the time being, the announcement did not trigger any storms of enthusiasm on the stock exchange. Swisscom shares lost -0.4 percent to CHF 508.20 just under an hour after the start of trading, while the market as a whole was up 0.5 percent.

The merger with Vodafone Italy offers considerable cost synergy potential and should support a market shakeout in the medium term, according to a commentary by Bank Vontobel. However, it is unlikely that the acquisition will have a positive impact on Swisscom's dividend policy in the short term "in view of the debt burden and the integration efforts". (SDA)