Vodafone’s Italy exit puts speed before valuation

Fast lane. Margherita Della Valle looks set to prioritise speed over valuation. The boss of $24 billion British telco Vodafone seems to like Swisscom’s 8 billion euro ($9 billion) offer for its hard-pressed Italian business. The price tag is lower than a previous offer by French rival Iliad, but fewer antitrust hurdles mean Vodafone has a bigger chance to access the deal proceeds rapidly.

The all-cash offer from $30 billion Swisscom comes just a month after Della Valle rebuffed Xavier Niel’s second attempt to get hold of Vodafone Italy. Iliad’s bid, which valued the Italian business of Vodafone at 10.45 billion euros including debt, was on paper higher. Swisscom’s bid is around 7.6 times Vodafone’s adjusted EBITDA after lease payments and some charges for the year to March 2024, which analysts see at around 1.05 billion euros. That’s less than the nearly 10 times multiple of Iliad’s offer on the same metric, Breakingviews calculations show.

Yet Iliad’s bid, which aimed to merge the two companies’ Italian operations, was fuzzier. It offered Vodafone cash proceeds of around 6.5 billion euros and a shareholder loan of 2 billion euros. Swisscom’s bid involves an upfront 8 billion euro payment for a full sale.

The biggest appeal, however, lies in the lack of antitrust headaches. Swisscom operates in Italy through fixed-line operator Fastweb, which has a relatively small mobile phone business. That should provide a speedier antitrust approval, avoiding the lengthy scrutiny and onerous conditions that slowed the Spanish tie-up of Orange and MásMóvil.

By exiting Italy, Della Valle would also advance her goal of executing fast deals to make her company less sprawling. Investors had punished the hesitancy of Della Valle’s predecessor Nick Read, and her rejection of Iliad’s offer might have made them think history was repeating itself. With Vodafone shares down 20% from when Della Valle took office in early January 2023, there’s a case to be made for not hanging around.