Tue. Jul 5th, 2022


French telecoms group Iliad said it had made an offer to buy Vodafone’s Italian business in a move aimed at consolidating the competitive market in Europe’s third-largest economy.

If the bid was accepted it would be a test of regulators’ views on cutting the number of telecom operators from four to three within a country, which they had previously blocked in Denmark in 2015 and the UK in 2016 over concerns that it would dampen competition and hurt consumers. The size of the bid was not disclosed.

Bloomberg News first reported the news of the offer. Vodafone declined to comment.

Iliad, which was founded by French billionaire Xavier Niel, entered the Italian mobile market in 2018 in its first foray outside its home country. It has since invested heavily to build a network and sought to woo customers with simpler and often cheaper offers than those of its rivals.

The group is still the smallest mobile operator in Italy with roughly 8 per cent market share compared to Vodafone with 28 per cent, according to the Italian telecoms regulator Agcom. It recently started selling broadband services as well, but remains small in that segment.

Niel took Iliad private last year in part over frustrations that public market investors were undervaluing the business. Iliad has also become more acquisitive in recent years, having done deals to acquire first a mobile operator then a cable broadband operator in Poland.

Whether Vodafone will accept the offer remains to be seen. The UK-listed group has been under pressure from activist investor Cevian Capital to restructure its portfolio, improve performance in key markets and refresh its board in an attempt to revive its lagging share price.

A second activist investor, Coast Capital Management, has also taken an undisclosed stake in Vodafone and engaged in discussions with its leadership. The New York-based fund’s founder James Rasteh told the Financial Times that he was “very supportive of the management at Vodafone” and that they should be given time to enact changes including exploring consolidation options.

Asked what he thought of the Iliad offer, he said: “Sector consolidation makes a lot of sense and tends to create value both as a buyer and a seller. But we defer to management to decide the right choice. ”

Vodafone chief executive Nick Read told the FT earlier this month that the group was working on several fronts, including looking at options to consolidate European markets and squeezing more value out of Vantage Towers, the mobile masts business it spun out last year. He said Vodafone “was active on a number of fronts” and that its focus was on “combinations, more than outright purchases” of competitors.

Italy is Vodafone’s third biggest market in terms of revenue after Germany and the UK. The country brought in € 4.5bn in revenue, or roughly 12 per cent of the group total, and € 1.6bn in earnings before interest, taxes, depreciation and amortization, or 11 per cent of the group total, in the 12 months to the end of March 2021.

Vodafone’s shares closed largely flat on Tuesday.

Additional reporting by Anna Gross



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