Swisscom the only remaining party in negotiations with Vodafone Italy, Telecom News, ET Telecom

Written by Amy Jo Crowley, Elvira Pollina, Paul Sandle

LONDON/MILAN: Swisscom is the only party in talks about a possible Vodafone partnership in Italy, sources told Reuters.

Merging Swisscom’s Fastweb’s Italian operations is the only option Vodafone has been working on after rejecting a proposal to combine its Italian operations with Iliad’s in January, said the person, who declined to be identified as the negotiations are private. Three sources related to the matter said.

Iliad had proposed a 50-50 joint venture with Italy’s Vodafone to create a carrier with a total enterprise value of 14.7 billion euros ($15.8 billion). Spokespeople for Vodafone and Swisscom declined to comment. Vodafone announced on January 31 that negotiations with Iliad were no longer taking place, but discussions were continuing “with other companies.”

But in a trading update five days later, Vodafone CEO Margherita Della Valle withdrew the reference to the others, saying only that the company was in “active discussions”.

Like other operators in the Italian mobile market, Vodafone is grappling with shrinking revenues and increasing profit margins. Increasing competition has caused total revenue in the Italian market to fall by 21% to 27.1 billion euros over the past 10 years, according to industry association Astel.

Swisscom’s partnership with Fastweb will create Italy’s second largest fixed broadband operator and give it a strong presence in a valuable business area. Analysts say the regulatory hurdles are lower than the combination with Iliad, but the potential cost benefits are lower.