By Sophie Sassard, Pamela Barbaglia and Anjuli Davies
LONDON (StartName) – Telecom operator Swisscom <SCMN.VX> is considering a possible sale of its Italian broadband firm Fastweb, which is worth up to 5 billion euros ($6.3 billion) and has been a target for Vodafone <VOD.L>, sources familiar with the situation said.
The Swiss majority state-owned firm, which has already rebuffed several takeover approaches from Vodafone <VOD.L> for Fastweb, is now working with UBS <UBSN.VX>, Vodafone’s long-term adviser, to facilitate a deal, said the sources who could not be named because the matter is private.
Swisscom, Fastweb and Vodafone declined to comment, while UBS was not immediately available for comment.
Swisscom acquired Milan-based Fastweb at an enterprise value of 4.2 billion euros in 2007, and has so far been reluctant to sell the company, which was a pioneer in fiber roll-out in Italy.
Fastweb could be worth between 4 billion and 5 billion euros based on 2013 EBITDA of 620 million Swiss francs (510 million euros) and sector multiples of between 8 and 10, said banking sources.
Another source said that while Vodafone is not currently in talks with Swisscom, it remains interested in acquiring Fastweb and would be open to discussions with Swisscom.
Its long-standing interest in Fastweb and its presence in Italy put Vodafone in a strong position to snap up Fastweb, but other sector players or private equity firms could show interest if Swisscom opted for a deal, said several sector bankers.
Snapping up Fastweb would allow Vodafone, Italy’s No. 2 mobile operator, to avoid a time-consuming landline network roll-out and better compete against former monopoly Telecom Italia <TLIT.MI> for bandwidth-hungry consumers.
Acquiring a broadband player in Italy would also complement Vodafone’s strategy in Europe as it seeks to diversify from its slow-growing mobile operations and expand in data and content services.
The British group has already acquired Kabel Deutschland <KD8Gn.DE> in Germany and ONO in Spain to offer bundle services to its customers in these countries.
Were Vodafone to buy Fastweb it would mark the final piece in the jigsaw for the British firm which is trying to either buy or build a comprehensive fixed-line offering in all of its large European markets.
Moving into cable is also financially appealing for Vodafone since mobile companies trade on average at 5.8 times EBITDA, against 10.7 times for the cable and media companies, according to Thomson StartName data.
Asked about a Fastweb acquisition on the sidelines of an industry gathering in Capri, Italy on October 2, Vodafone’s head of Italy Aldo Bisio said: “For such deals you need someone who wants to sell and someone who wants to buy. I don’t see such conditions in place at the moment.”
Fastweb was founded in 1999 as an alternative broadband provider for the municipality of Milan. Its network now aims to reach 7.5 million households by the end of 2016, or 27 percent of Italy’s population.
National telecom incumbent Telecom Italia is also exploring ways to boost its fiber optic business by acquiring a 53.8 percent stake in network specialist Metroweb Italia from Italy’s largest infrastructure fund F2i. Fastweb owns 10.6 percent of Metroweb.
Vodafone is unlikely to pursue an acquisition of Metroweb, which is worth about 500 million euros, as such a deal would be too small to be game-changing for Vodafone, said one of the sources.