What will change with the Vodafone-Iliad merger in Italy
The telecommunications companies Vodafone and Iliad are in talks to merge their activities in Italy. Facts, numbers and analysis
Merger coming for Vodafone and Iliad in Italy?
Discussions between the two telecommunications companies are ongoing, sources familiar with the matter told Reuters . Britain's Vodafone and France's Iliad are allegedly studying ways to group their respective businesses in Italy so as to reduce competition and increase margins.
Sources told Reuters that Iliad is working with investment bank Lazard on strategic plans for the country. Just tomorrow the Parisian operator will make its debut in fixed broadband in Italy.
Also Reuters notes that an agreement would create a telecommunications giant with a penetration of the mobile market (the only market in which Iliad is active) of around 36% and combined revenues of almost 6 billion euros.
“The competition on tariffs and Tim's plan to separate the network and the service company are pushing for a consolidation of the sector,” writes Repubblica . The discussions come in fact while Tim is still evaluating the 10.8 billion euro tender offer of the US fund Kkr .
So far the direct interested have not commented.
All the details.
THE POSITION OF ILIAD ITALIA
Iliad had made no secret of wanting to take the path of consolidation. Just last January 13, the head of Iliad Italia, Benedetto Levi, declared that the French company was open to the purchase of a rival operator.
“If a company, in whole or in part, becomes available on the market, we will evaluate it without any preconceptions”, he told Il Sole 24 Ore .
AND THAT OF VODAFONE
Vodafone is also of the same opinion.
As Reuters recalls, on November 17, Vodafone boss Nick Read said that consolidation was necessary in Europe, particularly in Italy, Spain and Portugal, where "all players are suffering".
THE ILIAD PLANS
In recent months, Iliad, led by billionaire founder Xavier Niel, has been examining options for further expanding into Italy. Today the operator is present only on the mobile segment, where it has 8.5 million subscribers. This corresponds to a market share of over 10%.
Niel, who founded Iliad in 1990 and sits on Kkr's board as an independent director, wants to dominate the fragmented Italian telecommunications market where it started an aggressive price war in 2018, when Iliad made its first foray into Italy.
ENTRY IN THE FIXED MARKET
In the meantime, Iliad will present its ultrabroadband offer in the fixed area tomorrow. As Il Sole 24 Ore points out , “to start up the telco will use the Open Fiber network and then add the Fibercop network (Tim-Kkr-Fastweb) at a later date”.
PENETRATION IN THE TRICOLOR MOBILE MARKET
According to the latest Agcom Observatory, Vodafone has a market penetration of 28.5% among mobile phone customers. Iliad has a mobile market share of approximately 7.7%. Together they would surpass market leader Tim (currently with a market share of 28.8%).
REVENUES COMPARED
From a revenue standpoint, Vodafone has an annual turnover of around 5 billion euros in Italy while Iliad (much smaller) recorded an annual turnover of 674 million euros in 2020. However, in the third quarter of 2021 the French company reported in Italy a 21% growth in turnover compared to the previous year, for 207 million euros.
CONSOLIDATION OBJECTIVE
For some time, sector executives have been calling for the consolidation of telecommunications from four to three operators in order to unlock cost synergies and increase margins by cutting the existing number of mobile operators in Italy, namely Tim, Vodafone, WindTre and Iliad.
"According to experts, marriage in Italy would have a great industrial sense, especially in view of a historical change in the competitive framework and the launch of 5g services: when Tim will have separated the network from the services, and all operators will be able to compete on equal terms and at the same rate on landlines, having a good commercial network and a large customer base on both landlines and mobile phones will make the difference ”underlines Repubblica .
“Joining forces is therefore considered an imperative. There was a first glimpse at the end of 2021 with the merger which Tiscali and Linkem are working on (the latter will be the controlling shareholder with 62%) ”underlines Il Sole 24 Ore . On December 30, the board of directors of Tiscali, the Sardinian telecommunications company with the greatest fiber coverage available in Italy founded by Renato Soru, and Linkem Retail, a company wholly owned by Linkem Spa, approved the merger project by incorporation of Linkem Retail into Tiscali. Linkem is the first operator in broadband access with wireless technologies (Fwa).
THE OBSTACLES TO OVERCOME
However, the way is not before obstacles. Among all, the green light of the European Antitrust.
Any merger would in fact require regulatory approval by Italy and the European Commission. And as Reuters points out, efforts to reduce the number of operators from four to three within EU member states have so far not been very successful.
In 2016, Three's attempt to buy O2 in the UK was blocked by Brussels. Although the merger that took place in 2018 between T-Mobile and Tele2 in the Netherlands has given hope back to the sector.
It should be remembered that Iliad entered the Italian market thanks to the merger of Wind and 3 Italia of CK Hutchison to create WindTre. To get the initial deal through the European Commission, the two decided to sell assets to the French company.
THE COMMENT OF THE ANALYSTS OF EQUITA SIM
If Vodafone and Iliad confirm the possibility of combining their respective Italian activities "it would be very positive news for the sector as there would be a consolidation from 4 to 3 infrastructured operators in the mobile sector and probably less aggression by Iliad in the fixed sector ”, Commented today Equita Sim picked up by MF . The company is "convinced that the regulator can approve the operation, despite an opposite attitude at the time of the deal between Wind and 3, given the less rigid attitude that has emerged more recently on its part and the European Court of Justice".
THE CONSIDERATIONS OF MEDIOBANCA
“Surely, added Mediobanca Securities, – as MF reports – such a deal, if confirmed,“ would be a turning point for the Italian telecommunications industry. Competition in the fixed line market is on the rise as new players continue to enter pending Iliad's arrival. In such a difficult context, we note that operators in Europe are calling for the consolidation of the sector and a more favorable approach to the European regulator. The United States, China and India ”, the investment bank continued,“ each have three players on the market, some European countries have up to five ”.
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/economia/che-cosa-cambiera-con-la-fusione-vodafone-iliad-in-italia/ on Mon, 24 Jan 2022 14:25:03 +0000.