Swisscom CEO Christoph Aeschlimann and Vodafone Group Margherita Della Valle
Fastweb held strong fixed-line fiber assets but operated as a junior mobile player on borrowed network capacity. Vodafone Italia commanded 20 million mobile customers and Italy's most awarded mobile network, yet was hemorrhaging value in a brutal price war. The strategic rationale was clear: fixed plus mobile equals convergence, convergence equals reduced churn, reduced churn equals margin expansion. But the execution risks remain equally real: in 2016, the Wind-Tre merger offered a similarly coherent thesis and projected significant synergies, yet failed in this exact market
Can this deal, which makes strong sense by the standard M&A playbook, survive contact with operational reality?
The Context
Italy's telecommunications market, the eurozone's third-largest by revenue at approximately €25 billion, was served until late 2024 by the same core group of operators across both mobile and fixed-line segments, though in different proportions. On the mobile side five operators competed: WindTre at 24.0%, TIM at 23.5%, Vodafone Italia at 21.0%, Iliad at 14.6%, and Fastweb at 4.7%. Four of these held near-equal positions between 14% and 24%; Fastweb was a marginal fifth player (AGCOM data, Q3 2024, measured by "human SIM" market share). On the fixed-line side, four operators competed (Iliad had virtually no fixed-line presence): TIM dominated at roughly 40%, followed by Vodafone at 15.6%, WindTre at 14.3%, and Fastweb at 13.1%.
Fastweb, Swisscom's Italian subsidiary since 2007, operated the country's second-largest fixed-line fiber network but its 3.4 million mobile subscribers relied on third-party MVNO arrangements. Vodafone Italia ran Italy's most awarded mobile network (Opensignal, November 2024) with 20 million customers, but had no owned fixed-line infrastructure. Vodafone Group was reshaping its European portfolio, having also sold Spain to Zegona for €5 billion, to concentrate on stronger markets.
This market structure creates two interrelated problems.
The first is a pricing death spiral. In microeconomics and game theory, an oligopoly with near-equal players creates defection incentives: each player's most rational move (cut prices to capture share) triggers retaliation, collapsing everyone's margins. Without consolidation (or an illegal cartel), the cycle has no stopping point unless one player becomes large or differentiated enough to anchor pricing. Deutsche Telekom (over 40% in Germany) and Orange (France) play that role. Italy never developed such an anchor: its top four mobile operators held between 14% and 24% each. The result was sustained erosion of ARPU (Average Revenue Per User), the most watched profitability metric in telecommunications.
The second is a convergence gap. Convergence means a single operator delivering both fixed-line and mobile services through owned infrastructure, as an integrated product. Bundled customers are stickier (switching means changing everything) and generate higher ARPU. In Germany and France, incumbents offer this. Italy had no operator capable of it at scale: an SME needing broadband, employee mobile, and IoT under one contract had to manage multiple providers. TIM came closest but carried €26.6 billion in net debt (pre-NetCo sale). WindTre had a limited fixed-line footprint. Iliad had virtually none.
These two problems are connected. The pricing death spiral persists partly because no operator can escape price-based competition by offering something structurally different. Convergence would provide that escape route.
The Deal
This deal did not promise to fix Italy's structural fragmentation. The combined entity at 26.1% mobile share is the largest by subscribers but not by the margin that anchors pricing discipline (Deutsche Telekom holds north of 40%). The core promise is asset complementarity: creating the first Italian operator capable of selling a genuine fixed-mobile bundle at national scale, from owned infrastructure on both sides, giving one player a way to compete on value rather than price alone. Convergence does not end the price war; it gives one player a way to partially step outside it.
The transaction was a 100% cash acquisition for €8 billion. Vodafone Italia reported €4.2 billion in service revenue and roughly €1.05 billion in Adjusted EBITDAaL for FY2024 (ending March 2024), implying a 7.6x LTM EV/EBITDA and sitting at the upper end of the 5-7x range typical for mature European telecom operators, reflecting the convergence premium. Financing was entirely new debt, doubling Swisscom's net debt and pushing leverage from 1.5x to 2.6x Net Debt/EBITDA (FYE 2025). Also, a separate brand license permits continued use of the Vodafone brand in Italy for up to five years, alongside Fastweb.
Christoph Aeschlimann, Swisscom’s CEO since June 2022, leads the combined group from Bern, while Walter Renna was appointed CEO of the Italian entity, Fastweb + Vodafone. Swisscom’s credibility rests on its nearly two-decade track record in Italy: since acquiring Fastweb in 2007, it has grown the subsidiary’s customers, revenues, and EBITDA by over 50%. Margherita Della Valle, Vodafone Group CEO, accepted Swisscom's €8 billion offer, well below Iliad's €11.25 billion bid for the unit in 2022. Two years of continued value erosion likely explained the discount, but it was a clean break from a market Vodafone could no longer afford to stay in.
The Case For
The commercial case rests on convergence as a competitive weapon. The combined entity is the first Italian operator capable of offering an integrated fixed-mobile bundle at national scale, targeting customers (especially enterprise) who value integrated service over the cheapest SIM. For an Italian SME, this means broadband, employee mobile plans, and IoT connectivity under a single contract and a single bill, something no other operator could offer from owned infrastructure. Simultaneously, cost synergies from merging two networks lower the cost base. A more defensible revenue stream from bundling, combined with lower costs from consolidation, produces an operator that can sustain investment in a market that punishes sub-scale, single-product players. That is the bet.
Swisscom projects €600 million in annual run-rate synergies, primarily from migrating Fastweb's mobile customers onto Vodafone's owned network (eliminating MVNO costs), consolidating procurement, and removing overhead, at an upfront cost of up to €200 million. The target is weighted toward cost reduction, the category empirical research identifies as more reliably achievable.
The Case Against
Merging two telecom operators requires unifying spectrum portfolios, radio access networks, billing platforms, customer databases, and retail channels. The specific vulnerability: Fastweb's 3.4 million mobile customers must migrate from third-party MVNO arrangements onto Vodafone's owned network, involving SIM reprovisioning, number portability, and meaningful attrition risk.
The most cautionary precedent sits in this same market. In 2016, 3 Italia and Wind Telecomunicazioni merged to form WindTre with projected €700 million in synergies. Then Iliad entered Italy in 2018 (acquiring spectrum the Commission required WindTre to divest) and launched aggressive price competition. A €6.6 billion 5G auction drained balance sheets. WindTre shed customers steadily. A 2023 Light Reading analysis described it as a merger that "went rotten." Fastweb + Vodafone has converged assets WindTre never possessed, but the precedent calibrates expectations.
The leverage position adds a specific constraint. Swisscom is a 51% state-owned company that chose to finance this acquisition entirely through debt, roughly doubling its net debt in a market with a track record of destroying operator value. At 2.6x Net Debt/EBITDA, the balance sheet is manageable but leaves limited margin. If synergy realization is delayed or integration disruptions cause customer defection, the deleveraging path narrows and Swisscom's dividend commitment could come under pressure.
The competitive response is predictable. Iliad, which twice sought to acquire Vodafone Italia (2022 and 2023), is the most directly threatened. A converged rival undermines its core strategy of attracting mobile-only customers on price. The likely response, more aggressive pricing or a push into fixed-line, could intensify the very price war the convergence thesis is designed to escape.
Politically, Swisscom's 51% Swiss government ownership creates an expectation that its mandate is domestic infrastructure. The Swiss People's Party opposed the deal, and 67% of voters opposed full privatization in a July 2024 poll. If integration struggles, political pressure to redirect capital to Swiss operations could constrain management at the worst moment.
Reflections for Business Leaders
For us at Glenshore, three dimensions that standard M&A playbook deal assessment tends to underweight will likely determine whether this transaction succeeds or fails.
The first concerns strategy versus anthropology. Telecom organizations develop deeply embedded cultures around network operations, field engineering, and customer service: ritualized daily practices, not abstract "cultural differences." Fastweb was a challenger (agile, fiber-focused), Vodafone Italia a conglomerate division (process-heavy, brand-conscious). Integration forces a choice about which tribe's rituals prevail and generates resentment in the tribe whose rituals are retired. The five-year Vodafone brand license buys time, but operating under multiple identities for half a decade creates ambiguity that compounds in both customer-facing interactions and internal decision-making.
The second distinguishes between what mergers reliably deliver and what they rarely achieve. Tangible asset synergies (network rationalization, procurement, overhead) are engineering problems with quantifiable solutions. Intangible capability transfer (a differentiated product, retaining Vodafone's engineering talent, preserving Fastweb's speed) determines whether a deal creates lasting advantage or temporary savings. Wind-Tre is instructive: cost synergies were partially captured, but brand trust and customer loyalty degraded faster than the cost base shrank. The question for Fastweb + Vodafone is whether the combined entity can build a converged product experience that customers recognize as genuinely different, not just two companies sharing a back office. The synergies most worth pursuing are the ones least amenable to a spreadsheet.
The third concerns timeframe and accountability. The appropriate evaluation window is 2028. The ultimate measure is not deleveraging or dividend targets but whether the acquisition strengthened the competitive position of both Swisscom and the Italian market, whether consumers gained better services, and whether the combined workforce emerged with a coherent identity. The acquirer inherits not just assets but obligations: to customers, employees, and a market whose health depends on the combined entity's conduct.
Swisscom's nearly two-decade track record at Fastweb provides reason for cautious optimism. The industrial logic is sound, the financing disciplined, the regulatory path cleared. The convergence bet has a strong foundation, but the real test remains in addressing the cultural differences between the two very different organizations, realizing intangible synergies beyond the spreadsheet, and meeting long-term obligations to customers and the market. That will determine whether Fastweb + Vodafone becomes the converged challenger its architects envisioned, and whether rivals like Iliad and WindTre are forced to converge… or concede.
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Amine Laouedj Managing Director, Glenshore
I advise responsible business leaders who wish to ensure their company ends up in the right hands and continues to flourish after their exit. If these perspectives resonate with your thoughts, I welcome a conversation. Please connect or message me on LinkedIn.
Glenshore is a boutique investment bank with the Succession M&A Playbook, a disciplined approach to align financial outcomes with long-term mission and legacy preservation. Learn more at glenshore.com.
Disclaimer: The analysis contained herein reflects publicly available information as of February 2026. All data points are sourced from official Swisscom disclosures, AGCOM regulatory filings, Vodafone Group announcements, and referenced third-party research. No proprietary or non-public information has been used.
