Iliad agrees deal to create fourth Italian mobile operator

Iliad signed an agreement with CK Hutchison and VimpelCom that could see the France-based company create a new mobile operator in Italy, should the proposed merger of Three Italy and Wind go ahead.

The Xavier Niel-owned company said it had agreed to acquire the assets that form the remedy package submitted by CK Hutchison and VimpelCom to the European Commission to secure approval for the planned merger.

Iliad also stressed that its agreement is subject to EC approval, which is due by Sept. 8. It has previously been reported that the EC is expected to issue the outcome of an initial review by Jul. 19.

CK Hutchison Holdings and VimpelCom said in August last year that they had agreed to form a 50:50 joint venture that would own and operate their respective mobile businesses in Italy, bringing together Three Italy and Wind Italy into a single entity. At the time, the companies hailed the transaction as the largest M&A deal in Italy since 2007, with a total value of €21.8 billion ($24 billion).

However, the EC is taking a harder stance on mergers that reduce the number of mobile operators within a member state of the European Union from four to three.

Indeed, the commission has already blocked CK Hutchison's proposal to buy O2 UK and merge it with Three UK in order to create a new mobile giant on the UK market.

The Hong Kong-based company has clearly learned some lessons in the process: creating the conditions for a new, fourth player could be looked on favourably by the regulators in Brussels.

Iliad, which operates mobile and fixed services under the Free brand in France, said the remedy package would enable it to offer competitive mobile services and become a fourth mobile network operator with nationwide coverage.

The agreement involves the transfer of 2x35 MHz frequencies in the 900, 1800, 2100 and 2600 MHz bands for €450 million to be paid between 2017 and 2019; an undertaking to buy several thousand macro sites in densely populated areas; an undertaking to create a RAN-sharing agreement for rural areas or to buy several thousand macro sites in those areas; and a 2G/3G/4G roaming agreement on the merged network for a five-year period with a one-year renewal option.

Iliad said it plans "to capitalise on the experience it has acquired in France with the successful launch of a fourth mobile network operator in 2012, and to carry out investments over a period of five-seven years."

The company added that majority shareholder Niel has stated that he does not currently hold any stake in the voting rights or capital of Telecom Italia and has only a marginal financial interest that will be sold in the next few weeks. The French entrepreneur previously invested in options to buy shares in the Italian operator.

"He fully supports Iliad's operation to create a new mobile network operator in Italy," the company said.

For more:
- see the Iliad release

Related articles:
EC set to issue preliminary ruling on Vodafone, Liberty Global Dutch JV by mid-July
EC delays decision by 15 days on CK Hutchison's planned Italian deal
Reports: Sky could play key role in future O2 UK, Wind Italy deals
Orange executive says European MNO consolidation on ice for at least two years
Xavier Niel sees Telecom Italia as consolidator rather than M&A target

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