This and the next could be two key months for risk in the sector of telephony Italian: on the one hand we could see a glimmer of hope in the negotiations between Vodafone and Iliad and on the other the operation between Wind Tre and the Swedish fund Eqt could emerge from the impasse, but the entanglements do not end here and the game could lead to moves to surprise and changes of fronts.
According to some rumors, the closest to a solution could be the match Vodafone-Iliad, which also includes Swiss Swisscom, parent company of Fastweb: according to some rumours, some news could arrive by January or at the latest on 5 February, the day of the release of the Vodafone group's quarterly accounts. Instead for Wind Tre and Eqt the keyday is February 12th when the deadline for the closing is set. In all this comes the question of Zefiro, jv of WindTre and Iliad. Looking further ahead, it is also destined to be included in the risk Team which had the approval of its board of directors for the "mother of all spin-off operations": that separation and sale of the network involving the former monopolist and KKR with the Mef expected to enter the game.
But let's now see how all the sides are positioned
Vodafone's change of direction and Iliad's proposal
At Vodafone everything changed after the arrival inlast April of the global manager Margaret of the Valley. Immediately after her appointment, the CEO was the protagonist of a strategic review plan for shareholdings. Moreover, the previous CEO Nick Read ended up giving up what the main shareholders branded as a strategic mistake: the inaction on the simplification front of the company and on the valorization of limping, if not loss-making, activities. The situation was no longer bearable, especially since Vodafone carries a debt of more than 40 billion on its shoulders (which dropped to 33 in the last full year). But Della Valle immediately moved his pawns with the sale of the activities in Hungary for 1,8 billion, with the marriage in the UK with Three (Ck Hutchison) and then with the sale of the Spanish branch to the Zegona fund.
However, market pressure remains strong. Compared to a year ago, Vodafone shares suffer a loss of 17 percent. It is worse (-31%) in comparison with the end of September 2022. This morning in London it was 70,48, up by 1,03%.
Last month liad he tried again. The French telephone company headed by Xavier Niel has officially presented a proposal for Vodafone's Italian assets. This time, however, Iliad is aiming not at the purchase but at the creation of a joint venture with Vodafone to combine the Italian activities of the two companies. In a press release, the French group announced of having put 8,5 billion euros on the table for Vodafone (valued at 10,45 billion) to carry out the merger between the two and create a NewCo with 50% shares. The valuation of the operation proposed by Iliad for Vodafone Italia is based on the latter's estimated EBITDA, which amounts to 1,34 billion euros for the 2024 financial year according to the brokers' consensus.
Two swords of Damocles hang over the operation. First of all, the large distance in valuations between the two assets (17x for Iliad versus 7,8x for Vodafone). And then the mechanism of call options on Vodafone's participation in the Newco (with the possibility for Iliad to acquire a 10% each year at the same price frozen since the closing) while there are no put options in favor of Vodafone which derives its 11% from Italy % of its revenue from group services. In this context, some rumors speak of the interest of Swisscom, an issue that has continued to circulate for years and returns cyclically. This time, however, Fastweb could make inroads precisely into the valuation gap that brought Iliad into an "advantaged" position compared to Vodafone within the joint venture as imagined by the French company.
Wind Tre, the Swedish fund Eqt and the connection with Iliad
The WindTre affair and its possible buyer, the Swedish fund EQT, is seen by some observers as the first operation to unbundle the TLC network in Italy. The last May Eqt Infrastructure, a fund controlled by the Wallenberg family through Investor AB which includes ABB, AstraZeneca, Ericsson, Electrolux in its orbit, has signed an agreement for the acquisition of 60% of a newco that will have the fixed and mobile network of the Italian operator, in a transaction that establishes an enterprise value of 3,4 billion euros. The closing of the operation is set on 12 February. This date is already the result of a three-month delay which was necessary given that the parties "were unable to reach an agreement with the interested third parties whose consents are necessary to satisfy the conditions precedent", we read in the communication of the last November 6th issued by Ck Hutchison, parent company of Wind Tre.
The reference, not made explicit, is to negotiations with Iliad (in particular) e Fastweb, with which Wind Tre has agreements for the 5G sharing. A hitch at the end for which, at least at the moment, no solution has been found.
Another plot: the Zefiro question (WindTre+Iliad)
However, the issue also needs to be resolved Zefiro. This is the joint venture between Wind Three and Iliad created right a year ago and which saw the operator led in Italy by Benedetto Levi gain a 50% stake in the company previously created by Wind Tre with around 7 thousand radio sites in the less densely populated areas of the country. An alliance to address the need to contain expenditure on investments in the mobile network.
The operation conceived by Wind Tre had to deal with the operator headed by Xavier Niel. Who, in turn, would have put on the table the clauses contained in the agreements in case of change of ownership structure. And at the same time also the need to review those agreements. Hence the stalemate, also linked to the fact that Iliad's exit from Zefiro would still represent a change in the "fundamentals" of the operation for which Eqt had come forward. Iliad (like Fastweb) would have no veto power. But without Iliad it is another operation. And here the mechanism would have ended up jamming. But as we have seen Iliad is making an effort with Vodafone. And if the latter were to accept, Iliad would probably need to leave Zefiro. At that point, Eqt's entry into the game could have represented the opportunity to put himself in the best conditions to do so.
