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A woman speaks on a cellphone as she arrives for a media conference at Iliad's offices in Milan, Italy. Picture: STEFANO RELLANDINI/REUTERS
A woman speaks on a cellphone as she arrives for a media conference at Iliad's offices in Milan, Italy. Picture: STEFANO RELLANDINI/REUTERS

London/Milan — Vodafone says it has rejected a sweetened offer from French telecoms operator Iliad to merge their Italian businesses and was pursuing other deals in a market where it is losing revenue and makes no return on its capital.

Iliad said on Wednesday the British company had rebuffed a revised 50:50 proposal to create an operator with a combined enterprise value of €14.7bn.

Vodafone said in December, after Iliad made its approach public, it was exploring options with several parties, potentially including a merger or a disposal.

One of them was a deal with Swisscom’s Fastweb Italian unit, sources familiar with the matter said.

A Vodafone spokesperson said on Wednesday: “We are no longer in talks with Iliad, but our discussions with others continue.”

Swisscom was not immediately available to comment.

The talks with Swisscom were more advanced than others, one person with knowledge of the matter said.

Analysts at Citibank said Vodafone’s rejection of Iliad, founded and majority owned by billionaire Xavier Niel, was disappointing.

“A deal with Swisscom’s Fastweb could now become the base case,” they said. “An inferior outcome in our view.”

Shares in Vodafone, which have fallen 28% in the past 12 months even as it agreed on consolidation deals in Spain and Britain, were trading down 3% on Wednesday.

A tie-up with Fastweb, which has a fibre network and offers mobile through network-sharing deals, will not face the tough regulatory hurdles as one with Iliad, but it offers lower potential synergies, according to analysts.

An combined Vodafone-Iliad would have become the leader in the Italian market, ahead of Telecom Italia and Hutchison’s Wind Tre.

Iliad said its rejected proposal was “the best possible business combination to benefit a struggling Italian market and telecommunications industry”.

The company, which has grown rapidly in Italy since its arrival in 2018, said it would continue to “fiercely pursue market share across all segments” as a standalone operator.

It increased its earlier offer by €100m to €6.6bn in cash, with Vodafone also lined up to receive €2bn of a shareholder loan.

Iliad would have received €400m in cash — €100m less than originally proposed — and also €2bn of a shareholder loan, it said.

The French company offered €11.25bn to buy Vodafone Italy outright in 2022 but was rebuffed. Later that year, Niel took control of a 2.5% stake in Vodafone.

Reuters

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