Bloomberg News

Vodafone Said to Weigh Fastweb Purchase in Internet Push (1)

June 13, 2013

Vodafone Said to Weigh Fastweb Buy as Part of Expansion Options

Vodafone is looking for acquisitions and partnerships across Europe as it works to expand the services it can offer customers. Photographer: Simon Dawson/Bloomberg

Vodafone Group Plc (VOD), which has approached Germany’s Kabel Deutschland Holding AG (KD8) about a takeover, is also considering an eventual acquisition of Fastweb SpA in Italy to expand its fixed-line and Internet assets, people familiar with the matter said.

The U.K. company has Fastweb, a unit of Swisscom AG (SCMN), on a list of potential targets as it considers options to add faster-growing investments in Europe, said the people, declining to be identified as the deliberations are private. For now, Vodafone is focused on completing a takeover of Kabel Deutschland, a deal worth at least $9 billion, they said.

Vodafone, the world’s second-largest wireless company, is mapping out possible deals as it explores how to use proceeds from the eventual sale of its 45 percent stake in U.S. mobile company Verizon Wireless, a transaction that may reap more than $100 billion. Fastweb, Italy’s third-largest retail broadband operator, has 1.9 million customers, the company said last month, and a book value of 2.9 billion euros ($3.9 billion).

Vodafone made two informal approaches for Fastweb this year and in 2011 that were rejected by Swisscom, two of the people said. Vodafone spokesman Simon Gordon declined to comment on the company’s interest in Fastweb. Swisscom spokesman Carsten Roetz declined to comment on any possible transaction.

Swisscom shares closed up 1.2 percent at 406.70 Swiss francs in Zurich after gaining as much as 2 percent earlier. Vodafone stock fell 1.3 percent to 178.70 pence in London.

Fastweb Cuts

Swisscom acquired Fastweb in 2007 to counter slowing growth in the Swiss market. It had to report a writedown on the value of the unit in 2012 amid intense competition in Italy and a weakening euro.

Swisscom said it would cut costs at Fastweb by 120 million euros through 2014 through “bad-debt management, organizational optimization and targeting the number of managers,” Chief Executive Officer Carsten Schloter said in 2012.

Still, Fastweb doubled its net customer gains in 2012 from 2011 as it bundled TV and broadband packages in a partnership with Sky Italia Srl, the company said in February. Last year, Fastweb signed an agreement with Telecom Italia SpA (TIT) to develop broadband infrastructure together. Fastweb generated 398 million euros in revenue in the first quarter and 97 million euros of earnings before interest, taxes, depreciation and amortization, it said last month.

Kabel Deutschland

Vodafone is looking for acquisitions and partnerships across Europe as it works to expand the services it can offer customers. Increasingly popular bundles of television, phone and Internet service raise total monthly bills and may provide a way for the company to grow in an otherwise saturated market.

Newbury, England-based Vodafone said yesterday that it’s interested in acquiring Kabel Deutschland to expand services in Germany. Vodafone contacted Kabel Deutschland to discuss an offer in the past week, people familiar with the matter said.

Telecommunications companies have commanded a 27 percent takeover premium in the past 12 months, according to data compiled by Bloomberg, based on the average of 27 acquisitions valued at more than $1 billion. Softbank Corp. (9984)’s pending deal for Sprint Nextel Corp. (S:US) would be the largest this year. The Japanese company’s latest offer for Sprint is $21.6 billion for a 78 percent stake.

The telecommunications industry has been involved in $83.8 billion in transactions this year, according to data from 244 deals compiled by Bloomberg. It’s followed by the real-estate industry, which has accounted for $64.1 billion spent.

Verizon Communications Inc. (VZ:US) wants to dissolve its joint venture Verizon Wireless with Vodafone this year to win full control over the biggest U.S. wireless provider, people familiar with the matter have said.

To contact the reporters on this story: Aaron Kirchfeld in London at akirchfeld@bloomberg.net; Jeffrey McCracken in New York at jmccracken3@bloomberg.net; Daniele Lepido in Milan at dlepido1@bloomberg.net

To contact the editors responsible for this story: Kenneth Wong at kwong11@bloomberg.net; Jacqueline Simmons at jackiem@bloomberg.net


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