The fifteen members of Telecom Italia’s board of directors play under pressure. Gathered on Monday, February 14, to study a project to split the fixed network of the telecommunications operator, an idea regularly mentioned in recent years but constantly rejected, the administrators must deal with an unprecedented agitation for the sector. While the former incumbent operator has itself been the subject, since November 2021, of a public takeover bid by the American investment fund KKR, the French Iliad, number four in Italian telecoms, is launched an assault on number three, Vodafone. Two operations of more than 10 billion euros each, which, if successful, will reconfigure the transalpine market and might be followed by replicas in other equally competitive European markets, such as Spain or France.
Thursday, February 10, Vofadone rejected the proposal of 11.25 billion euros formulated by Iliad for its Italian subsidiary. This “strongly preliminary and not firm expression of interest”as the British telecom operator described in a brief press release, “not in the best interest” of its shareholders. But at no time does Vodafone say that its Italian subsidiary is not for sale. The Briton even recognizes “continue to pragmatically pursue several opportunities for consolidation (…) in its main European markets, including Italy”. For his part, Iliad “took note” of refusal and assures that he is now going “pursue its autonomous strategy” in the Italian market. Common statements in business diplomacy.
“The arrival of Iliad in Italy in 2018 is behind the 30% drop in Vodafone’s operating profit in this market in three years. Difficult for the group to accept the first proposal that comes along, which is moreover at a price at the bottom of the estimate range”, says a shareholder of the British operator. According to analysts at Barclays Bank, the Italian subsidiary of Vodafone is worth between 10.2 billion and 15.2 billion euros in the event of a takeover. Thanks to the savings in investment or structural costs that it would generate, a merger with Iliad Italia would create 7 billion to 11 billion euros in synergies, continues Barclays. Figures that inevitably give food for thought.
Price cuts
With 10.5% of the Italian mobile market at the end of September 2021, according to the Italian telecoms regulator Agcom, excluding subscriptions for connected objects (machine to machine, M2M), Iliad is the only potential partner for Vodafone, which owns 23.3% of the sector. The “combined market share” of the two operators, around 33%, “would not be significantly higher than that of Deutsche Telekom in Germany (41%) or Orange in France (37%)”, underlines Tajesh Tailor, telecoms specialist at the rating agency Fitch Ratings. An argument to put forward with the competition authorities, anxious to maintain a sufficient level of competition to avoid a flight in the price of subscriptions. The latest to arrive on the Italian telecoms market, Free was itself born from the acquisition of assets from Wind Tre, a condition imposed by the European Commission on their merger.
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