CK Hutchison Holdings Ltd., the multinational flagship of Hong Kong tycoon Li Ka-shing, and Dutch telecom group Vimpelcom are combining their Italian mobile operations in a long-awaited consolidation.
The 50-50 joint venture will cut the number of players in Europe’s fourth largest telecom market to three from four.
If approved by regulators, it would combine Vimpelcom’s Wind Telecommunicazioni, Italy’s third largest mobile network operator, with fourth-placed 3 Italia, according to Reuters.
It would reduce the Italian market to three players of roughly the same size and create a new competitor for Telecom Italia and Vodafone.
The new company said the deal would deliver cost savings worth more than 5 billion euros (US$5.4 billion), most of which would come from combining the two mobile networks.
Neither company will have to inject money into the new entity, in contrast to expectations that a capital hike of 2 billion euros was on the cards to help reduce debt.
A person close to the deal said the new company was valued at 21.8 billion euros, with Wind’s contribution being assets worth 13.9 billion in 2014, while Hutchison had 7.9 billion euros. Wind also has high debt.
It remains to be see how the joint ownership will work, especially since Hutchison and Vimpelcom are backed by powerful billionaires.
Hutchison chairman Li Ka-shing and Russian billionaire Mikhail Fridman, whose LetterOne fund holds 47.9 percent of Vimpelcom’s voting rights, have held on-off talks for years on a deal in Italy and came close a few times before scrapping it at the eleventh hour over control.
Maximo Ibarra, chief executive of Wind, will lead the new entity. Stefano Invernizzi, finance chief of 3 Italia will serve as chief financial officer of the combined group, and Hutchison will name the first chairman.
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