Newly published regulatory disclosures from Vodafone Group PLC (LSE:VOD) have provided an insight into the financial rationale behind its £15 billion merger with Three.
The combined telecoms business is predicted to achieve over £700 million in recurring annual cost and capital expenditure synergies by the fifth year after completion.
Vodafone estimates the net present value of these efficiencies to exceed £7 billion.
The merger will focus on four key areas of efficiency, namely network infrastructure consolidation, rationalisation of IT systems, administrative costs, and sales, distribution, and logistics activities.
Vodafone and Three were given the go-ahead on their merger by the competition regulator last week, following a protracted review process.
Under the terms of the approval, the merged entity must commit £11 billion to roll out 5G infrastructure across the UK. This is roughly 57% above the estimated NPV of the planned merger.
Vodafone also updated on the €8 billion (£6.6 billion) sale of its Italian business, which forms part of the group’s decision to dispose of underperforming European business.
The transaction has received regulatory approvals from the Presidency of the Council of Ministers under Italian Golden Power legislation, the Swiss Competition Commission, and the EU Commission.
Approval from the Italian Competition Authority remains pending.
Vodafone Italy delivered more than €800 million in profit before tax in the six months ending 30 September and had nearly €6 billion in net assets at the end of the period.