Swisscom AG ( SWZCF ) (OTC:SWZCF) inked binding deals with Vodafone Group Plc ( VOD ) to acquire 100% of Vodafone Italia for €8 billion ($8.71 billion), aiming to merge it with Fastweb, its Italian subsidiary.

The transaction consideration will be 100% cash and will be fully debt-financed, Swisscom ( SWZCF ) said in a press release.

Vodafone will provide certain services for an initial total annual service charge of ~€350 million, expected to decrease over time.

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Vodafone Italia and Fastweb unite to combine their mobile and fixed infrastructures, skills, and resources, positioning themselves as a prominent challenger in a market ripe with growth prospects.

The enhanced scale, streamlined cost structure, and substantial annual synergies of approximately €600 million will empower the merged entity to create substantial value for stakeholders. 

This will allow sustained investments in Italy’s telecom sector, delivering innovative, competitively priced converged services to enhance customer experiences across all market segments.

Following the Italian deal and the previously agreed sale of its Spanish operation, Vodafone announced plans to return €4 billion via share buybacks to shareholders.

“Our transactions in Italy and Spain will deliver €12 billion of upfront cash proceeds and we intend to return €4 billion to shareholders via buybacks, as part of our broader capital allocation review," said Group Chief Executive Margherita Della Valle.

Additionally, it intends to reduce its dividend to 4.5 euro cents per share starting from the 2025 financial year. The company’s FY24 total ordinary dividend is expected to be maintained at 9.0c per share. 

Swisscom ( SWZCF ) announced that the debt-financed transaction will be settled in cash. The closing of the deal is contingent upon obtaining regulatory and customary approvals. 

Swisscom ( SWZCF ) stated that it does not anticipate requiring a shareholder vote and anticipates the closure to take place in the first quarter of 2025.

“With the merger we’re creating a leading provider in a market with great growth opportunities and in doing so taking a big step towards our goal of profitable growth in Italy,” Swisscom ( SWZCF ) CEO Christoph Aeschlimann said in a video statement, Reuters reported.

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Price Action: VOD shares are trading higher by 4.24% to $8.85 premarket on the last check Friday.