• In December, Iliad proposed a €10bn-plus merger of its Italian operations with those of Vodafone to create Italy’s largest mobile operator
• Iliad followed that up with a slightly improved offer that gave Vodafone more cash and flexibility
• Vodafone has rejected the deal but says it still has other irons in the Italian fire
• Iliad says it will now focus on going solo in Italy and ‘fiercely’ pursue market share gains

Pan-European network operator Iliad says it will focus on growing its independent mobile and fixed broadband business in Italy after Vodafone rejected an improved €10bn-plus offer to merge Iliad Italia and Vodafone Italia and jointly own what would be Italy’s largest mobile operator by market share. 

Iliad initially approached its rival with the offer, which valued the struggling Vodafone Italia at €10.45bn, in December. That deal would have netted Vodafone €6.5bn in cash, a 50% stake in the joint operation and an option to reduce its holding over time by selling chunks to Iliad – see Iliad courts Vodafone with €10bn Italian merger offer.

Vodafone noted at the time that it is “supportive of in-market consolidation in countries where it is not achieving appropriate returns on invested capital” – and Italy is one of those markets – and that it was exploring several options in Italy, such as the Iliad offer. 

On Wednesday morning, Iliad announced that it had then revised its proposal with a slightly better offer that would have given Vodafone €6.6bn in cash and no future stake sale options that would benefit Iliad. “The Iliad Group is confident that the offer presented was the best possible business combination to benefit a struggling Italian market and telecommunications industry,” it noted in a press release issued early on Wednesday. 

The offer made the case for creating a stronger single operation that could afford to invest further in 5G and fibre access rollout. The new entity would also benefit from Iliad’s proven expertise in developing communications service packages that meet consumers’ needs and Vodafone’s experience and know-how in the enterprise services sector. The merged company would, based on the current market statistics, create Italy’s single largest mobile player with about 28 million mobile customers and a market share of about 35%, ahead of Wind Tre and Telecom Italia (TIM), which both have a market share of just over 24%.

But the deal wasn’t good enough for Vodafone, which “failed to accept this offer”, noted Iliad. 

Responding to a request for comment, Vodafone stated: ““We said in December that we are exploring options with several parties in Italy. We are no longer in talks with Iliad, but our discussions with others continue.” 

Vodafone’s share price dropped by 3.6% to 66.3 pence on the London Stock Exchange following the Iliad announcement. 

While Vodafone continues to explore other exit routes from Italy, Iliad has vowed to “strengthen its positions in Italy and fiercely pursue market share gains across all segments.” It currently has more than 10.5 million mobile customers, more than 170,000 fixed broadband customers – and claims to be adding new fibre access customers at a faster rate than any other major broadband service provider in Italy – and topped annual revenues of €1bn for 2023. 

The Italian market is in a state of turmoil right now, with Telecom Italia trying to close out the tortured sale of its fixed access network assets to KKR, Vodafone looking to lessen its load or exit completely and Wind Tre scrambling to cut costs so it can close its deal to sell a majority stake in its network infrastructure assets to private equity firm EQT.   

- Ray Le Maistre, Editorial Director, TelecomTV