Vimpelcom and Hutchison have agreed to combine their Italian mobile operations in a 50-50 joint venture in a long-awaited deal to consolidate Europe's fourth-largest telecom market.
Vimpelcom and Hutchison have agreed to combine their Italian mobile operations in a 50-50 joint venture in a long-awaited deal to consolidate Europe’s fourth-largest telecom market.
The merger will combine Vimpelcom’s WIND Telecommunicazioni, the country’s third-largest mobile network operator, with fourth-placed 3 Italia, reducing the Italian market to three players of roughly the same size.
The new company, which will compete with Telecom Italia and Vodafone, said that the deal would deliver cost savings worth more than 5 billion euros ($5.44 billion), most of which would come from combining the two mobile networks.
Neither company will inject money into the new entity, in contrast to expectations before the deal that a capital hike of 2 billion euro was on the cards to help reduce debt.
A person close to the deal said the new company would be valued at around 21.8 billion euros, with Wind’s contribution being assets worth 13.9 billion in 2014, while Hutchison had 7.9 billion euros.
It will have more than 31 million mobile customers, 2.8 million fixed-line customers and sales of about 6.4 million euros. It will be led by Maximo Ibarra, the current chief executive of Wind.
The companies expect the deal to close in 12 months. They will begin filing for regulatory approval as early as September.
Any deal would need antitrust clearance and regulators are expected to demand concessions to protect consumers from higher prices.
But since European and national regulators have already given the green light to similar deals in Ireland, Germany and Austria, Italian consolidation is also expected to get approval.
Vimpelcom’s CEO Jean-Yves Charlier said that the agreement with Hutchison allowed both parties to walk away from the deal if regulators demanded concessions that made it unpalatable.
Hutchison has considerable experience dealing with antitrust regulators since it was involved in similar acquisitions in Austria and Ireland. It is also now in the process of seeking approvals for acquisitions in Denmark and Britain.
Hutchison was advised by Goldman Sachs and law firm Freshfields. Vimpelcom was advised by HSBC and Morgan Stanley, and law firm Allen & Overy. ($1 = 0.9186 euros)