Amy Thomson London

Vodafone Group’s $25 billion (R268bn) of cable acquisitions in Germany and Spain leaves one major European market where it needs more competitive landline offerings: Italy.

Italy is Vodafone’s third-largest European market by sales, trailing Germany and the UK. It is also the worst performer, with a 17 percent drop in service revenue and losses in mobile subscribers last quarter.

“Italy is a substantial asset, it has been a major drag with those revenues being down,” Macquarie Bank analyst Guy Peddy said. “What they’ve announced in Italy to date is a self-build, self-help strategy; the number of local infrastructure plays to acquire is limited.”

Vodafone Italy’s new chief executive, Aldo Bisio, took over in January and is working to add a fixed-line business to the wireless network. Building out a high-speed fibre-optic broadband network would allow Vodafone to sell a combination of services and might reduce customer turnover.

Italy’s major internet providers are Telecom Italia, VimpelCom’s Wind unit and Fastweb. Vodafone made informal approaches for Fastweb last year and in 2011, which were rejected by parent company Swisscom partly because of price differences, people familiar with the talks said.

Vodafone agreed on Monday to buy Grupo Corporativo Ono in Spain for e7.2bn (R107bn) including debt. The deal follows its e10.5bn takeover of Kabel Deutschland last year, with integration due to start next month.

Telecom Italia, which also has assets outside Europe, lost e674 million last year and had its debt cut to junk by Standard & Poor’s and Moody’s Investors Service. That leaves Wind, which operates under the Infostrada brand, as a possible takeover target.

Chief executive Vittorio Colao has said he planned to remake Vodafone into a data company, giving customers access to their content using any platform, fixed or mobile.

Europe’s telecoms market is consolidating as Vodafone and rivals such as Liberty Global compete for assets. Liberty agreed to take full control of Dutch broadband provider Ziggo for $6.7bn in January, and last week French cable carrier Numericable won a bid to combine with Vivendi’s SFR wireless unit.

The Ono deal gives Vodafone 1.9 million customers in Spain, complementing its mobile service. The deal would bring savings of about e2bn and potentially lift revenue by e1bn, Vodafone said on Monday.

Vodafone was not focused on growing only through acquisitions and had several of projects to build its own networks or partner with other carriers, Colao said in a call with analysts on Monday. – Bloomberg