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(Alliance News) - Vodafone Group PLC on Friday said it has agreed to combine its Italian tower portfolio with INWIT SpA, the towers unit of Telecom Italia.
Vodafone will receive EUR2.14 billion in cash plus a 37.5% stake in the combined company.
Shares in Vodafone were up 10% at 144.98 pence on Friday afternoon.
Vodafone and Telecom Italia will both recapitalise INWIT after the business combination up to a maximum of 6.0 times debt to Ebitda, subject to achieving a BB plus or equivalent credit rating. Vodafone will use the cash from the combination and recapitalisation to retire its existing debt.
Vodafone and Telecom Italia will retain joint control but will consider cutting their respective ownership levels to a minimum of 25% from 37.5%.
The combined entity will remain listed on the Milan Stock Exchange and, based on the 30-day volume-weighted average price of INWIT shares prior to the announcement, Vodafone's share is worth around EUR3.13 billion, implying an enterprise value for Vodafone's towers business of EUR5.27 billion.
The combination will have a pro-forma asset base of 22,100 towers and be the second largest listed tower operator in Europe, said Vodafone. It is expected to deliver additional earnings before interest, depreciation, taxation, and amortisation from synergies and committed services of around EUR110 million by 2026.
Vodafone also announced a 4G and 5G active network sharing partnership with Telecom Italia, extending their existing passive sharing agreement.
The partnership is aimed at achieving faster 5G deployments at a lower cost over a larger area, with net cashflow benefits to Vodafone of EUR800 million at the minimum over the next ten years.
Vodafone Italia and Telecom Italia have also committed to a new master services agreement with an initial eight-year term plus eight-year renewal periods. They have also committed to add extra points-of-presence on INWIT's towers in the next four years.
Under the agreement, INWIT will be the preferred new tower supplier for Vodafone Italia and Telecom Italia to facilitate the 5G roll-out, with Vodafone Italia and Telecom Italia to commit anchor tenants on 1,900 new towers and 2,500 small cell sites to be built by INWIT in the next ten years.
Vodafone Italia Chief Executive Aldo Bisio said: "This agreement will enable us to step up the rollout of 5G for the benefit of our customers and the community as a whole. 5G has a key role to play in modernising the country.
"It will provide the technology platform from which to launch innovative new services capable of making business models more efficient and improving productivity throughout the value chain, helping to build a more competitive digital economy. Network sharing reaps the benefits of 5G and at the same time reduces the impact on the environment and lowers rollout costs, allowing more investment in services for customers."
Earlier in the day, Vodafone said would separate its European tower infrastructure business into a new entity, as it posted a drop in first quarter revenue.
The telecoms company said its European tower infrastructure will be legally separated into a new company. Vodafone then either plans an initial public offering for the new company or else disposal of a minority stake - with potential to disposal of "minority or minority stakes at an individual country level".
Vodafone will use the sale programme proceeds to reduce debts.
Vodafone also posted revenue figures for the first quarter ended June 30, showing a EUR200 million drop in group revenue for the three months to June 30 to EUR10.7 billion due to foreign exchange movements.
Organic service revenue dropped 0.2%, but was up versus the fourth quarter of its prior financial year which saw a 0.7% decline.
The company said service revenue in Europe was down 1.7% versus a 2.1% fourth quarter decline and Rest of the World was up 5.3%, slowed from 5.7% growth in the fourth quarter as regulation in South Africa was offset by growth in other markets.
