Revamp: Margherita Della Valle aims to simplify the telecoms giant
Vodafone is selling its Italian business to a Swiss rival for £6.8billion in the ‘third and final step’ of its European makeover.
The telecoms giant has agreed to sell Vodafone Italia to Swisscom as part of wider plans to reshape its sprawling business.
It follows weeks of speculation about the fate of the Italian unit, which saw Vodafone snub an offer from French telecoms operator Iliad in January.
Vodafone yesterday said the deal with Swisscom, which is majority-owned by the Swiss government, would allow it to leave Italy, where it was ‘not possible’ to achieve adequate returns.
Announcing the deal, the FTSE 100 company also revealed it would return up to £3.4billion to shareholders through buybacks and cut its dividend to 4.5 cents a share (3.8p) from next year, down from 9 cents (7p) in 2024.
Vodafone shares rose 5.7 per cent.
The sale of the Italian business is the third major move by chief executive Margherita Della Valle, who has been looking to simplify the company’s operations amid pressure from shareholders.
Since taking over in January last year, the Italian-born boss has dumped Vodafone’s Spanish business in a £4.4billion deal with Zegona and has been spearheading a planned £15billion mega-merger between Vodafone and Three UK, which is owned by the Hong Kong conglomerate CK Hutchison.
Della Valle said: ‘I am announcing the third and final step in the reshaping of our European operations. 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.’
The planned buyback will be made up of £1.7billion from the sale of Vodafone Spain and up to £1.7billion from the sale of Italian arm, which is subject to regulatory and other approvals, the company said.
Sophie Lund-Yates, lead analyst at Hargreaves Lansdown, said: ‘Vodafone’s Italian business has been struggling, so shedding this weight should help the group refocus.’
She added the announcement of a buyback would also be seen by shareholders as a ‘welcome token for their patience in what has been a difficult period’.
However, some analysts have warned that slashing the dividend would hurt investors in the long run. Russ Mould at AJ Bell said: ‘A lower dividend over the long term reduces Vodafone’s ongoing financial commitment to shareholders. This may help put capital allocation on a more sustainable footing, but it does dilute one of the key reasons people hold the shares.’
And the company is still grappling with its flailing German business, which remains its largest market. Karen Egan, at research group 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.’
Voda’s German unit posted revenues of £2.5billion in the three months to the end of December, up just 0.3 per cent from the same period the year before.
And its planned merger with Three is far from guaranteed.
The tie-up – which could create Britain’s biggest telecoms operator – is facing scrutiny from the competition regulators, which have until next Friday to decide whether to launch a further investigation into the deal.
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