Vodafone & Telecom Italia To Merge Telecom Towers In Italy
Zacks Investment Research | May 16, 2019 05:57AM ET
Vodafone Group Plc (NASDAQ:VOD) is planning to merge its tower infrastructure in Italy with Infrastrutture Wireless Italiane S.p.A. (INWIT) to enhance return on capital invested, per Reuters. Headquartered in Milan, INWIT is the tower unit of the Italian telecommunications company, Telecom Italia (MI:TLIT) S.p.A. (NYSE:TI) .
The deal, expected to be signed by this summer-end, is part of Telecom Italia’s three-year strategy to trim its more than €25 billion ($28.34 billion) debt. The move would also include a partnership to enable faster deployment of fifth-generation mobile phone services over a vast geographic area at a lesser cost.
Reportedly, the combination would leave Vodafone and Telecom Italia with equal shareholdings and governance rights. Notably, Vodafone and Telecom Italia inked an agreement in February to assess the combination of their 22,000 telecom towers in Italy under a single operation.
In addition, Vodafone is eyeing to reduce its huge debt burden. It has entered into an agreement to divest its New Zealand business to a global consortium of investors, subject to regulatory approvals. At the same time, the company has decided to reduce its quarterly dividend payout to create sufficient financial headroom and focus more on the core European markets.
The company also announced that it intends to reduce its quarterly dividend to 9 eurocents per share, representing a 40% year-over-year decrease. It expects the lower dividend payout to help it reduce its massive debt burden, which swelled to more than €27 billion as of Mar 31, 2019. This, in turn, is likely to facilitate the company to de-lever to the low end of its targeted 2.5x-3.0x leverage range in the next few years.
Shares of Vodafone have incurred an average loss of 16.7% compared with the Zacks Investment Research
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