The European Commission has approved CK Hutchison’s and VimpelCom's plans to merge their Italian assets after they agreed to sell assets that will facilitate Iliad’s move into the Italian market.
Wind, owned by VimpelCom, will combine 3 Italia in a deal worth €7.9 billion, after EU competition commissioner Margrethe Vestager rubber-stamped the deal, citing the “strong concessions” offered by the two parties.
"Today's decision ensures that the Italian mobile sector remains competitive, so that consumers can continue to enjoy innovative mobile services at fair prices and on high quality networks,” Vestager explained. “We can approve the deal because Hutchison and VimpelCom have offered a strong remedy that enables a new mobile network operator, Iliad, to enter the Italian market.
“This case shows that telecom companies in Europe can grow by consolidation within the same country, provided effective competition is preserved. It also shows they can grow by cross-border expansion, such as Iliad in this case.”
The combined entity will have over 31 million mobile subscribers and 2.8 million fixed customers, being supported by more than 21,000 sites. The deal is expected to close in the final quarter of 2016.
Jean-Yves Charlier, CEO of VimpelCom, said: “The merger will create a leading and financially solid mobile operator in Italy that will benefit from substantial synergies of combining the number three and number four operators in the marketplace.
“The joint venture will also benefit from a healthier debt profile and will be in a position to deliver solid deleveraging in the medium term. On completion, the combined business will not only be good for consumers, businesses and the economy in Italy but will also deliver long-term value to its shareholders.”
The 50-50 agreement would see the number of mobile operators in Italy fall from four to three (Hutchison/Wind, Vodafone Italia and Telecom Italia), but the EU have ordered the joint venture to divest some of its combined mobile spectrum to French operator Iliad, facilitate their launch into the Italian market. It will be Iliad’s first expansion outside of its home market.
During a results call held earlier this week, an Iliad executive said the firm is aiming to achieve a 15% share of the Italian market.
The EU decision comes just months after Vestager rejected CK Hutchison’s £10.25 billion bid to buy O2 UK from Telefonica, citing concerns around competition.
Commenting on the Commission’s approval, Canning Fok, CK Hutchison Group co-managing director, said: “Today is a good day for businesses and consumers across Italy. This joint venture will unlock major investment in Italy’s digital infrastructure, creating a telecoms company with the scale and strength to offer world-leading telecoms services with greater reliability, coverage and speed.
“The joint venture will ensure Europe’s fourth largest telecoms market remains a leading player in the global digital economy.”