Vodafone Group Plc. ( VOD ), the
second-largest wireless carrier in the world, is considering to
acquire Italian fixed line operator, Fastweb S.P.A. The move is
viewed as an attempt by the company to bolster its landline and
Fastweb, a unit of Swisscom AG, is Italy's third-largest retail
broadband operator and is reported to have 1.9 million customers.
This is the third approach by Vodafone to acquire Fastweb, as its
earlier offers were rejected by Swisscom.
Fastweb sells bundled TV and broadband packages in partnership
with Sky Italia Srl. The company has also signed an agreement with
Telecom Italia S.P.A. ( TI ) to develop
This is the second approach by Vodafone in quick succession to
acquire a European telecom operator after it recently made an
initial offering of €7.2 billion (approximately $9.6 billion) for
Kabel Deutschland. Kabel Deutschland offers Pay-TV, broadband
internet and fixed-line voice services through cable as well as
wireless services by collaborating with the other industry
Vodafone exited the financial year 2013 with cash and cash
equivalents of £7.6 billion ($12.05billion) and free cash flow of
£5.6 billion ($8.8 billion). However, the company has a high
leverage position with an outstanding debt of £29.0 billion ($45.9
billion) at the end of 2013.
Pricing pressure and macroeconomic uncertainty has affected
Vodafone as the company reported a 16% annualized decline in
revenues from Southern Europe. Declining revenues from countries
like Italy and Spain majorly affected the results.
Inspite of the poor performance, Vodafone is eying a number of
acquisitions to strengthen its services across Europe. The company
is rumoured to sale its 45% Verizon Wireless stake to the U.S.
telecom giant, Verizon Communications Inc. ( VZ ) for $100 billion.
The proceeds might be used to fund the aforementioned
We believe that the takeover of Fastweb will not only provide
Vodafone access to the existing setup of Fastweb but will also
fortify its position against rival, Liberty Global
Inc. ( LBTYA ), which is
currently competing with Vodafone over European assets.
However, it remains to be seen whether the company goes ahead
with these acquisitions if its proposed stake sale to Verizon does
Vodafone currently carries a Zacks Rank #3 (Hold).LIBERTY GLBL-A (LBTYA): Free Stock Analysis
ReportTELECOM ITA-ADR (TI): Free Stock Analysis
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