Swisscom has entered into binding agreements with the Vodafone Plc Group for theacquisition of 100% of Vodafone Italia for 8 billion euros with the aim of integrating it with Fastweb, its subsidiary in Italy.
The combination of high-quality complementary mobile and fixed infrastructure, as well as the expertise and assets of Fastweb and Vodafone Italia, will create a leading convergent operator in Italy. Economies of scale, more efficient cost structure and significant synergies will allow NewCo to generate high value for all stakeholders, support investments and offer innovative convergent services at competitive prices, improving performance and experience for customers in all market segments. The transaction remains subject to regulatory and other relevant regulatory approval.
With this transaction Swisscom significantly strengthens its presence in Italy, where it has operated successfully since 2007 through Fastweb. Over the last ten years, Fastweb has recorded growth of over 50% in terms of customers, turnover and adjusted EBITDA and has established itself as one of the main operators in the Italian market. Vodafone Italia is a quality mobile network operator with a large customer base. By combining Fastweb’s strengths in fixed connectivity with Vodafone Italia’s leadership in mobile services, the NewCo will be able to generate significant benefits for consumers, businesses and the country.
Benefits for private mobile and landline customers
As for the mobile network, customers will benefit from a better connectivity and quality of the service, thanks to a proprietary network fully managed end-to-end. Broadband customers will also be able to enjoy better quality of service, thanks to the combination of Fastweb’s proprietary network and Vodafone’s 5G Fixed Wireless Access (FWA). Private customers in Italy will have access to a combination of high-performance solutions based on fiber and mobile telephony. As a result, the new company’s customer base will benefit from convergent services, improved performance and a competitively priced customer experience.
Benefits for companies and public administration
Access to complementary assets and skills, such as cutting-edge cloud infrastructure, Fastweb’s advanced cybersecurity and AI solutions and Vodafone Italia’s mobile assets, will provide business customers with a broader portfolio of high-quality connectivity and ICT services through a single access point, accelerating the digitalisation of businesses and public administration in Italy.
Benefits for the country and for the competition
The new company will be more commercially resilient, thus ensuring sustained levels of long-term investment in improved fixed and mobile network infrastructure and innovation, helping to bridge the digital divide and accelerate digital transformation of Italy. The transaction will create a competitive operator with converging assets and the economies of scale necessary to compete effectively in the market and to increase the level of competition in the country. The new company will also continue to make its high-quality fixed and mobile infrastructure available to third parties for wholesale access services.
Significant opportunities to create value at an attractive valuation
The enterprise value of 8 billion euros implies transaction multiples of 5.1x EBITDAaL[1] by 9,2x OpFCF[1] based on run-rate synergies of approximately €600 million per year (7.8x EBITDAaL and 29.4x OpFCF before synergies). The acquisition is expected to create substantial value for Swisscom shareholders, which will be neutral to Swisscom’s free cash flow (FCF) in the first year and accretive to FCF from the second year after the sale (excluding integration costs) and which will contribute to FCF growth later. This is fully supported by tangible synergies in terms of costs and investments, with limited execution risk, as a significant part of the synergies is driven by the migration of traffic onto the new company’s own infrastructure.
Dividend increase and strong balance sheet
The acquisition will be entirely debt financed, increasing Swisscom’s leverage to 2.6x (net debt/EBITDA) at the end of 2025, while maintaining a strong balance sheet. Swisscom expects to maintain an ‘A’ corporate credit rating, one of the highest among European companies in the telecommunications sector, supported by a clear deleveraging path. Provided it closes in early 2025Swisscom intends to increase the annual dividend to 26 francs/share payable in 2026 (for the 2025 financial year), with the ambition of further dividend growth thereafter, supported by the realization of synergies and subject to evolution of the FCF.
Closing expected in the 1st quarter of 2025
The closing is subject to approvals regulatory and other competent authorities, will not require a vote of Swisscom shareholders and is expected to occur in first quarter of 2025.
Post-closing relationship with the Vodafone Group
The new company and the Vodafone Group will enter into some transitional and long-term service agreements, including a licensing agreement that allows theuse of the Vodafone brand in Italy for a maximum of 5 years after closing. Vodafone will provide some services for an initial total annual fee of ~350 million euros, expected to decrease over time
Swisscom and Vodafone Group are also evaluating a more in-depth commercial relationship; in particular, it concerns possible cooperation even outside Italy in various sectors such as IoT, business services and solutions, procurement, shared operational services and roaming.
Continued high investments in Switzerland
The focus on the Swiss market remains unchanged, with continued high investments in innovation, high-quality services and next-generation infrastructure. Current network expansion targets, such as fiber optic coverage of 75-80% by 2030, therefore remain unchanged. Swisscom’s operations in Switzerland and Italy will continue to be managed by two separate management teams that will focus fully on their respective markets, supported by streamlined business functions and with minimal operational dependencies.
Strengthening of Swisscom as a whole
Christoph AeschlimannCEO of Swisscom, commented: «Swisscom has been operating successfully in Italy since the acquisition of Fastweb in 2007. Over this period we have generated a good investment track record and profitable growth in Italy. The industrial logic of this merger is very solid. Fastweb and Vodafone Italia represent an ideal combination to generate high added value for all stakeholders. As a result, private and business customers will benefit from the most comprehensive offering. Swisscom will also be strengthened as a whole, allowing us to continue to make significant investments in the Swiss and Italian markets».
Michael Rechsteinerpresident of the Board of Directors, underlined: «The Board of Directors of Swisscom has thoroughly and carefully analyzed the opportunities and risks of this transaction and is convinced that the opportunities for all parties involved far outweigh the risks of a transaction of this magnitude. The acquisition of Vodafone Italia is in line with the Federal Council’s strategic objectives for Swisscom. In the full belief that, overall, the decision is in the interests of Swisscom and Switzerland, the Board of Directors unanimously approved the transaction».
Margherita Of the valleyCEO of Vodafone Group: «By combining Vodafone Italia and Fastweb, we create a strong telecommunications company with a convergent offering, well positioned to face competition in the Italian market. At the same time, we are creating the opportunity to build a broader commercial partnership between Swisscom and Vodafone».
Transaction Advisors
Evercore Partners International LLP is serving as lead financial advisor to Swisscom in this transaction. Deutsche Bank SA acts as financial advisor. JP Morgan Securities plc is acting as financial advisor and has issued a Fairness Opinion in favor of Swisscom. Deutsche Bank SA, ING Wholesale Banking in Switzerland and UniCredit are the main underwriters of the debt financing. Legance Avvocati Associati is the principal legal advisor to Swisscom, White & Case LLP is the legal advisor for regulatory matters, Travers Smith LLP is the legal advisor for UK law, Sullivan & Cromwell LLP is the legal advisor for financing and McDermott, Will & Emery Studio Legale Associato is the tax advisor. PwC Switzerland and PwC Italy are consultants for the financial and accounting audit of Swisscom.
[1] Swisscom’s estimate for the 12-month period ending 31 December 2023, on an adjusted basis of approximately €176 million in group service charges that are not included in Vodafone’s adjusted EBITDAaL for segment reporting purposes and €97 million euros of non-monetary accounting gains relating to the sale of Vodafone Italia’s towers to Inwit which are included in the adjusted EBITDAaL. OpFCF defined as EBITDAaL minus investment.
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