By Amy-Jo Crowley, Elvira Pollina and Paul Sandle
LONDON/MILAN (Reuters) – French telecoms group Iliad wants to finalise a proposal to Vodafone Italy to combine their Italian operations in a joint venture by the end of January, two sources briefed on the matter said.
Vodafone CEO Margherita Della Valle, under pressure to improve profitability, said last month the British group was reviewing options for its Italian operation, the last of three troubled European markets she had said need to be fixed.
Total revenue in the Italian market has fallen by 21% in the last decade to 27.1 billion euros ($29.6 billion), according to trade association Asstel, amid cut-throat price competition.
Della Valle said in November that no operator was delivering returns above the cost of capital. Iliad offered 11.25 billion euros to buy Vodafone Italy last year, but was rebuffed.
It is now exploring a joint venture, the sources said, adding that the French company is working to finalise a proposal by the end of January.
French billionaire Xavier Niel, founder and majority owner of Iliad, bought a 2.5% stake in Vodafone last year through an investment vehicle.
Iliad and Vodafone declined to comment. While Vodafone has been considering options including a straight sale or a joint venture, it might prefer to remain in Italy, one of the people and another source said, cautioning deliberations are ongoing.
Recent media reports say that Vodafone is also evaluating a potential combination of its assets with those of Swisscom’s Italian unit Fastweb. A deal with Fastweb would create Italy’s second largest fixed-line broadband operator, with a strong footprint in the prized business segment.
A spokesperson for Swisscom declined to comment. Della Valle told reporters last month after its first-half results that Vodafone was exploring consolidation opportunities in Italy, where it had a “very strong” company, but there was no timeline for any decision.
She said its position in Italy was “very different” from that in Spain, where it agreed to sell its business to Zegona Communications in October, with a “strong” brand and network. Any deal will need to be cleared by EU antitrust regulators, who have previously taken a tough approach towards mergers that shrink the number of players in a country from four to three. But with Fastweb emerging effectively as the fifth nationwide mobile network operator, a deal could be easier to get antitrust clearance in Italy than in other regions, Citi analysts said in a note this month.
($1 = 0.9164 euros)
(Reporting by Amy-Jo Crowley and Paul Sandle in London, Elvira Pollina in Milan; Editing by Anousha Sakoui and Alexander Smith)
