Vodafone, Iliad In Talks To Combine Their Italian Units

Telecom firms Vodafone and Iliad are in talks to strike a deal in Italy that would combine their respective businesses in a bid to end cut-throat competition in the euro zone's third-biggest economy, sources familiar with the matter told Pamela Barbaglia and Elvira Pollina of Reuters.

Photo Insert: Vodafone Italy executives during a meeting

Discussions between the two companies are ongoing and both parties are actively studying ways to clinch a tie-up of their respective businesses in Italy, the sources said, speaking on condition of anonymity.

Iliad, which will make its wireline broadband debut in Italy on Jan. 25, is working with investment bank Lazard on its strategic plans in Italy, one of the sources said, cautioning that a deal was not certain.

If successful, a deal would create a telecoms powerhouse with a mobile market penetration of about 36% and combined revenues of nearly 6 billion euros ($6.80 billion).

Iliad, led by billionaire founder Xavier Niel, has been reviewing options to further expand in Italy in recent months as it seeks to take advantage of deal fever in Italy's telecoms industry to accelerate consolidation and cease a price war that has been slashing its margins, the sources said.

The discussions come as incumbent Telecom Italia is still assessing a 10.8 billion euro ($12.25 billion) takeover approach from US fund KKR aimed at taking Italy's biggest phone group private.

Niel, who founded Iliad in 1990 and sits on KKR's board as an independent board director, wants to be kingmaker in the fragmented Italian telecoms market. He started an aggressive price war in 2018 when Iliad made its first foray in Italy.

Industry executives have repeatedly urged to pursue four-to-three telecoms mergers that could unlock cost synergies and lift margins by cutting the existing number of mobile operators in Italy, namely TIM, Vodafone, WindTre, and Iliad.

Iliad's Italy boss Benedetto Levi said on Jan. 13 that the French firm was open to buying a rival operator.

"If a company, as a whole or in part, becomes available on the market we will consider it without any preconception," he told financial daily Il Sole 24 Ore. Previously, Vodafone's boss Nick Read said on Nov. 17 that consolidation was needed in Europe, particularly in Italy, Spain, and Portugal where "all players are suffering."

WEEKLY FEATURE : MVP Group Keeps Lights On During Pandemic