Swisscom's $9 Billion Vodafone Italia Deal Faces In-Depth Antitrust Probe — Update

By Adam Whittaker

Italy's competition regulator opened an in-depth probe into Swisscom's $8.81 billion acquisition of Vodafone Italia to assess whether the deal complies with the country's antitrust rules.

The investigation puts under the Italian Competition Authority's scrutiny a deal that could reshape the country's telecommunications market, allowing the U.K.'s Vodafone Group to exit Italy and expanding Swisscom's presence there.

The probe was disclosed Thursday by the Swiss telecommunications group, which said it would work with the competition authority to secure a timely clearance. No timeline for the completion of the investigation was provided.

The Italian Competition Authority declined to comment on the probe.

The move comes just days after Mario Draghi, former European Central Bank chief and Italian prime minister, advocated for European Union policies to facilitate consolidation of the fragmented telecom sector in a long-anticipated report on the bloc's competitiveness. Regulation and competition policy in the bloc had discouraged consolidation in favor of lower prices, and this is preventing European companies from making critical-infrastructure investments, Draghi's report said.

In-depth investigations aren't uncommon in the telecommunications sector, Swisscom said. The company remains convinced that the transaction to buy Vodafone Italia is pro-competitive, it said.

Italian antitrust regulators have traditionally focused more on low consumer prices than on businesses' ability to generate returns on capital, ING analysts wrote in a note to clients.

"Therefore, we still think there is a probability that the acquisition gets blocked, although this remains an unlikely and undesired outcome," the ING analysts said.

Shares in Swisscom and Vodafone traded down slightly in European morning trade, while rival Telecom Italia jumped more than 7%.

To date, the proposed acquisition has received unconditional approval from the Italian executive and the Swiss competition regulator, Swisscom said. It is still subject to further regulatory approvals, but Swisscom expects the transaction to complete in the first quarter of 2025.

The all-cash deal that was first announced in March, bringing together Vodafone Italia's mobile customer base with the fixed operations of the Swiss group's Fastweb Italian subsidiary.

For Swisscom, the deal creates a converged operator in Italy--a telecom provider that offers an integrated blend of services--that it believes will allow it exploit growth opportunities there.

Meanwhile for the indebted Vodafone--which turned down a bid in January for the unit from the French billionaire Xavier Niel's Iliad Group--the deal is one of several announced in recent years designed to overhaul its European business, streamline operations and reduce debt.

Write to Adam Whittaker at adam.whittaker@wsj.com

(END) Dow Jones Newswires

September 12, 2024 05:50 ET (09:50 GMT)

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