The iliad Group, headquartered in Paris, has submitted a proposal to U.K.-based Vodafone Group (NASDAQ: VOD) to merge iliad’s and Vodafone’s businesses in Italy. The company says the merger would create a new entity, tentatively dubbed NewCo, that would benefit from the combination of iliad’s innovative approach to connectivity, affordability, and digital inclusivity and Vodafone’s enterprise business expertise.
iliad believes that NewCo could become the significant operator in the Italian telecom market by investing in network modernization and customer-centric solutions that help accelerate Italy’s digital transformation. Moreover, it claims the proposed merger would create an innovative challenger in an Italian market that already has five mobile network operators and more than 10 fixed broadband providers.
The iliad Group is the parent of network operators Free in France, iliad in Italy and Play in Poland. The Group has over 17,400 employees serving a combined 47.8 million subscribers and generated nearly $10 billion in revenues in the last 12 months.
According to Inside Towers Intelligence, iliad Italy is the country’s fourth mobile network operator with 10.6 million subscribers at the end of 3Q23. Vodafone Italia, the third largest MNO in Italy behind TIM and Wind Tre, reported 17.5 million subscribers in the same period.
Analyzing public information, iliad calculated an enterprise value for Vodafone Italia of approximately $11.4 billion. This figure would represent a premium in terms of an EBITDAaL multiple which iliad says reflects the potential for NewCo to become a strong player in Italian telecom markets following a merger.
Pro forma, iliad indicates the merged business would generate revenues of around $6.3 billion and EBITDAaL of approximately $1.8 billion for fiscal year ending March 2024. It expects to realize annual capex and opex run rate synergies of more than $655 million.
iliad suggests the transaction also meets Vodafone’s publicly stated intention to streamline its operations and reduce operating costs. Toward that end, Vodafone has already taken steps such as selling its stake in Vantage Towers to KKR and Global Infrastructure Partners, combining operations with Three UK, and selling its Spanish business to Zegona Communications, Inside Towers reported. A potential merger with iliad in Italy could help Vodafone gain size and become more competitive, while also reducing the number of network operators in the country.
“We believe that the profiles and complementary expertise of iliad and Vodafone in Italy would allow us to build a strong operator with the ability and financial strength to invest for the long term,” comments Thomas Reynaud, iliad Group CEO. “NewCo would be fully committed to accelerating the country’s digital transformation and especially fiber adoption and 5G deployment, with more than [$4.4] billion of investment planned over the next 5 years.”
The company said the proposal has the unanimous support of iliad’s board of directors and its main shareholder, Xavier Niel. Vodafone has not yet responded publicly to the proposal.
By John Celentano, Inside Towers Business Editor
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