Vodafone offloads Italy arm for £6.8bn

Vodafone is selling its Italian business to a Swiss rival for £6.8bn in the “third and final step” of its European transformation.

The telecommunications giant has agreed to sell Vodafone Italia to Swisscom as part of wider plans to reshape its growing business.

This follows weeks of speculation over the fate of the Italian unit, which saw Vodafone reject an offer from French telecoms operator Iliad in January.

Vodafone said yesterday that the deal with Swisscom, which is majority owned by the Swiss government, would allow it to exit Italy, where it was “not possible” to achieve adequate returns.

Announcing the deal, the FTSE 100 company also revealed it would return up to £3.4bn to shareholders through buybacks and cut its dividend to 4.5p per share (3.8p) from next year, up from to 9 cents (7 pence) in 2024.

Vodafone shares rose 5.7 percent.

The sale of the Italian business is the third major move by Chief Executive Margherita Della Valle, who has been seeking to simplify the company’s operations amid pressure from shareholders.

Since taking over in January last year, the Italian boss has divested Vodafone’s Spanish business in a £4.4bn deal with Zegona and has been spearheading a planned £15bn mega-merger between Vodafone and Three UK, Hong Kong property. CK Hutchison conglomerate.

Della Valle said: ‘I am announcing the third and final step in the reshaping of our European operations. In the future, our companies will operate in growing telecommunications markets, where we maintain strong positions, allowing us to achieve stronger and more predictable growth in Europe.”

The planned buyback will be made up of 1.7 billion pounds from the sale of Vodafone Spain and up to 1.7 billion pounds from the sale of the Italian subsidiary, which is subject to regulatory and other approvals, the company said.

Sophie Lund-Yates, principal analyst at Hargreaves Lansdown, said: “Vodafone’s Italian business has been struggling, so shedding this weight should help the group reorient itself.”

He added that the announcement of a buyback would also be seen by shareholders as a “welcome display of their patience in what has been a difficult period”.

However, some analysts have warned that cutting the dividend would hurt long-term investors. AJ Bell’s Russ Mold said: ‘A lower long-term dividend reduces Vodafone’s ongoing financial commitment to shareholders. This may help make capital allocation more sustainable, but it dilutes one of the key reasons why people own stocks.’

And the company is still grappling with its faltering German business, which remains its largest market. Karen Egan, of research group Enders Analysis, said: “The company highlights how well positioned it is 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 has not yet decided on that change.”

Voda’s German unit posted revenue of £2.5bn in the three months to the end of December, just 0.3 per cent higher than the same period a year earlier.

And its planned merger with Three is far from guaranteed.

The alliance, which could create Britain’s largest telecoms operator, faces scrutiny from competition regulators, who have until next Friday to decide whether to launch a further investigation into the deal.