Vodafone in ‘aggressive’ contract talks with Italy as Germany’s economic recovery slows, ET Telecom

paul sandle

LONDON: Vodafone said on Monday it was in “active discussions” about a partnership in Italy, its worst-performing major market, after its biggest Germany reported slowing third-quarter growth. . The British group last month rejected a merger proposal from Italian rival Iliad in favor of pursuing other options.

Vodafone, which agreed last year to merge with Britain’s Hutchison’s Three and sell its Spanish operations, is considering a partnership with Swisscom’s Italian arm Fastweb, people familiar with the matter said.

Chief Executive Officer Margherita Della Valle said the group was “having live discussions” in Italy.

“We remain focused on delivering the best value creation for Vodafone, just as we have driven integration in the past.”

Vodafone reported a 4.7% increase in third-quarter service revenue, in line with the previous quarter. This is because the decline in Germany’s contribution, where growth slowed from 1.1% to 0.3%, was offset by a narrower decline in Spain.

Della Valle said Germany’s economic slowdown reflects a temporary benefit from the previous quarter.

“Underlying commercial performance is accelerating,” she said. “Broadband cancellations are now a thing of the past and there are great offers on the market supported by excellent fixed and mobile networks.”

Italy was the toughest market, with service revenue falling 1.3% in the third quarter.

Vodafone’s share price has fallen 25% in the past 12 months, but was down 1.2% in early trading.

Citi analysts said the update was broadly in line with expectations, “although there may be concerns about a slowdown in Germany.”

Vodafone announced last month that it was in talks with several parties in Italy, but discussions with Swisscom were further along than in other countries, one of the people familiar with the matter said. Swisscom declined to comment at the time.

Vodafone reiterated its full-year outlook for adjusted core profit to be roughly flat at around 13.3 billion euros ($14.3 billion) and free cash flow at around 3.3 billion euros.

But analysts are skeptical. Company consensus forecasts average revenue of 13.07 billion euros and cash flow of 3.13 billion euros.