Vodafone offered to join forces with rival Iliad in Italy amid Three UK merger

For free real time breaking news alerts sent straight to your inbox sign up to our breaking news emails

Sign up to our free breaking news emails

Vodafone has received an offer to merge its Italian operations with those of telecommunications firm Iliad Group in a deal which values the division at £9 billion.

Iliad said joining forces in Italy would “create the most innovative telecom challenger” in the country and accelerate the rollout of fibre broadband and 5G.

The offer comes after Vodafone struck a deal to merge its UK operations with Three UK to create Britain’s biggest mobile phone network worth £15 billion.

Iliad, which provides internet and mobile services in France, Italy and Poland, revealed that it has sent a proposal to telecoms giant Vodafone inviting a merger.

Its founder and controlling shareholder is French businessman Xavier Niel who has an estimated worth of nearly seven billion US dollars (£5.5 billion), according to Forbes.

The market context in Italy calls for the creation of the most innovative telecom challenger, with ability to compete and create value in a competitive environment

Thomas Reynaud, Iliad Group’s chief executive

The proposal values Vodafone Italy at 10.45 billion euro (£9 billion), and Iliad Italy at 4.45 billion euro (£3.8 billion)

As part of the deal, Vodafone will gain half of the share capital of the combined group, as well as a 6.5 billion euro (£5.6 billion) cash payment and a two billion euro (£1.7 billion) shareholder loan.

Iliad said the proposed merger would help drive Italy’s digital transformation and fibre adoption, creating a combined group of five mobile network operators and more than 10 fixed broadband providers.

It also estimated the merged business would generate revenues of around 5.8 billion euro (£5 billion) and earnings of about 1.6 billion euro (£1.4 billion) for the financial year to March.

Thomas Reynaud, Iliad Group’s chief executive, said: “The market context in Italy calls for the creation of the most innovative telecom challenger, with ability to compete and create value in a competitive environment.

“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.”

The offer comes as Vodafone is in the middle of an overhaul which has seen it shed thousands of jobs this year.

The firm is planning to cut about 11,000 jobs across its global operations over three years as part of efforts to boost its financial performance.

Around 2,700 job cuts were completed in the latest half year, it said in November.

It also recently agreed to sell its Spanish arm for £4.4 billion, and it has previously struck deals to sell its Hungarian and Ghanaian divisions.

The mega-merger with Three UK is expected to be completed before the end of next year, despite criticism from consumer groups who have warned that the move risks raising prices and lowering service quality for customers.

Shares in Vodafone jumped by more than 6% on Monday morning.

Vodafone has not responded to the merger proposal.