Vodafone unveils €4bn capital return after selling Italian unit

(Sharecast News) - Vodafone and Swisscom have confirmed that the Swiss telecom group will take over Vodafone Italy for €8bn, enabling the UK company to return €4bn to shareholders. The deal, which follows a statement released two weeks ago that confirmed media speculation regarding a potential sale, is the "final step of the portfolio right-sizing" announced last May, Vodafone said on Friday.

Vodafone has now raised €12bn from the sale of its Spanish and Italian divisions combined - following the disposal of its Spanish operations to Zegona for €5bn announced in October - paving the way for a €4bn capital return via share buybacks.

However, the company also announced that it would be "rebasing" its dividend to 4.5 cents per share from 2025 onwards, down from an estimated 9.0 cents in 2024, but "with an ambition to grow it over time".

"The new dividend has been set at a sustainable level, which ensures appropriate cash flow cover and sufficient flexibility to invest in the business for growth," the company said.

Vodafone Italy, which accounts for 11% of Vodafone's group services revenues, generated €2.32m in total revenue in the company's first fiscal half ended 30 September. However, the disposal will allow the company to "reshape" its European footprint focused on growing markets, it said.

"Going forward, our businesses will be operating in growing telco markets - where we hold strong positions - enabling us to deliver predictable, stronger growth in Europe. This will be coupled with our acceleration in B2B, as we continue to take share in an expanding digital services market," said Vodafone chief executive Margherita Della Valle.

Meanwhile, Swisscom intends to merge Vodafone's Italian unit with its own Italian division, Fastweb, giving the company increased scale, more efficient cost structure and annual run-rate synergies of €600m.

"Vodafone Italia and Fastweb will bring together complementary high-quality mobile and fixed infrastructures, competencies, and capabilities to create a leading converged challenger in a market with material growth opportunities," Swisscom said in a statement. "The transaction is a key step for Swisscom to achieve its strategic objective of profitable growth in Italy. Swisscom intends to increase the dividend and expects to retain its excellent corporate credit rating."

The deal is subject to regulatory approval and customary requirements, but is not expected to close until the first quarter of 2025.