Mergers & Acquisitions

Italy approves CK Hutchison-VimpelCom mobile network merger

PUBLISHED : Tuesday, 25 October, 2016, 6:15pm
UPDATED : Tuesday, 25 October, 2016, 10:34pm

CK Hutchison Holdings and Amsterdam-based VimpelCom have received final approval from the Ministry of Economic Development in Italy to form a joint venture that would create the largest mobile network operator in that country.

In a joint statement on Tuesday, CK Hutchison and VimpelCom said the government go-ahead means they are on track to complete the merger of their respective mobile businesses, Three Italia and Wind Telecomunicazioni, by the end of this year.

That deal, valued at €21.8 billion (HK$183.97 billion), was reported last year to be one of the largest mergers and acquisition transactions in Italy since 2007.

“The combined entity will deliver major investment into Italy’s digital infrastructure, bring benefits to consumers and businesses across Italy, and unlock significant value through synergies,” CK Hutchison and VimpelCom said.

The Italian government’s approval comes nearly two months since the European Commission agreed to the two companies’ proposed 50-50 joint venture, following an investigation that it initiated in March.

Margrethe Vestager, the European Commissioner for Competition, said on September 1 that CK Hutchison and VimpelCom “offered a strong remedy that enables a new mobile network operator, Iliad, to enter the Italian market”.

CK Hutchison, controlled by Hong Kong tycoon Li Ka-shing, and Nasdaq-listed VimpelCom received the go-ahead on the condition that the two firms divest sufficient assets to allow French mobile network operator Iliad to compete in the same market, according to the commission.

Under the so-called “fix-it-first” remedy proposed to the commission, the CK Hutchison-VimpelCom venture would divest a certain amount of their radio spectrum from different frequency bands.

They will also have an infrastructure-sharing arrangement, allowing Iliad to piggyback on the venture’s several thousand mobile base station sites in Italy until the French operator has built its own mobile network.

The transfer of spectrum blocks and co-sharing of mobile base stations would enable Iliad to become the fourth mobile operator in Italy, where Vodafone and Telecom Italia’s Tim service also operate.

The combined Three Italia and Wind operation was estimated last year to cover more than 31 million mobile subscribers and 2.8 million fixed-line customers in Italy.