Iliad said combining the Italian operations of Iliad and Vodafone would create Italy's most innovative telecom challenger.

The deal values Vodafone Italia at €10.45 billion (EV). Vodafone would obtain half of NewCo's share capital, a €6.5 billion cash payment, and a €2.0 billion shareholder loan to ensure long-term alignment. Vodafone's equity in NewCo at closing was valued at €1.95 billion

iliad Italia valued at €4.45 billion (EV). iliad would get the other half of the share capital a €500 million cash payment and a €2.0 billion shareholder loan.

The deal has the support of iliad's board of directors and its main shareholder Xavier Niel.

"Thanks to the joint expertise and talent at iliad and Vodafone, NewCo would become the leading actor for investment in cutting-edge technology and customer-centric solutions in the Italian telecom market, supporting and accelerating the country's digital transformation and especially fiber adoption," an Iliad press release said.

The combined entity would specifically benefit from iliad's innovative approach to connectivity, affordability, digital inclusivity, and Vodafone's expertise in B2B.

The proposed merger would create the most innovative challenger in the Italian market with five mobile network operators and more than ten fixed broadband providers.

As part of the proposed transaction, iliad would have a call option on Vodafone's equity stake in NewCo. It could acquire a block of 10 per cent of the NewCo share capital every year at a price per share equal to the equity value at closing. If Illiad chooses to exercise the call options fully, this would generate an additional €1.95 billion in cash for Vodafone.

The merged business would be expected to generate revenues of c€5.8 billion and EBITDAaL of approximately €1.6 billion for the financial year ending March 20241.

Iliad Group CEO Thomas Reynaud said the Italian market needed an innovative telecom challenger to compete and create value in a competitive environment.

"We believe that the profiles and complementary expertise of iliad and Vodafone in Italy would allow us to build a strong operator with the ability and financial strength to invest for the long term," he said.

NewCo would fully commit to accelerating the country's digital transformation, especially fibre adoption and 5G deployment, with more than €4 billion of investment planned over the next five years."