Vodafone offloads Italian arm and kicks off bumper buyback

Vodafone has struck a deal to offload its Italian arm for €8bn (£6.3bn) and announced plans for €4bn (£3.4bn) share buyback today in the “third and final step” of efforts to simplify its sprawling European business.

In a statement this morning, the FTSE 100 telecoms giant said it would sell its Italian business to Swisscom in the latest of a number of bumper deals struck by new chief Margherita Della Valle.

Della Valle has been on a push to boost profitability and Vodafone’s flagging share price which has struggled in recent years. In a statement today, she said the Italian deal was “the third and final step in the reshaping of our European operation” after a recent move to offload its Spanish arm.

“Going forward, our businesses will be operating in growing telco markets – where we hold strong positions – enabling us to deliver predictable, stronger growth in Europe,” she said. “This will be coupled with our acceleration in B2B, as we continue to take share in an expanding digital services market.”

Taken together, the sale of the assets in Italy and Spain are set to deliver €12bn (£10.3bn) of upfront cash proceeds, which the firm said it will return to shareholders with a €4bn (£3.4) buyback as “part of our broader capital allocation review.”

As part of that review, the dividend payout for shareholders will be rebased to 4.45p per share to reflect the “different level of cash generation” after the sale of the two businesses.

The news sent shares up three per cent this morning but Vodafone has shed more than half its value over the past five years and has fallen into the sights of activist investors. Della Valle marked her first results call with the City last year by admitting the firm’s performance had not been good enough.

The Italian and Spanish markets have dragged on Vodafone for years and the offloads will allow the firm to focus on turning around performance in Germany and a renewed push in the UK.

Vodafone said it will also be doubling down on growth in the business-to-business market going forward.

Della Valle added: “The sale of Vodafone Italy to Swisscom creates significant value for Vodafone and ensures the business maintains its leading position in Italy, which has been built through the dedicated commitment of our colleagues to serving our customers over many years.”