Vodafone to buy Tele2 Italy and Spain

The deal will allow Vodafone, the world's biggest mobile phone company by sales, to supply fixed line broadband Internet to customers in Italy and Spain, adding to its broadband assets in Britain, Germany and France.

Vodafone said the deal would be broadly neutral to its adjusted earnings per share in the first full year after completion, excluding the impact of acquired intangible asset amortisation.

"This acquisition is consistent with our strategy of meeting our customers' total communications needs," Vodafone Chief Executive Arun Sarin said in a statement.

"It will generate substantial time to market benefits in Italy and Spain, where low broadband penetration and the market structure make ownership of fixed broadband assets attractive.

"We have now established a clear route to delivering fixed broadband services in each of our major European markets."

Tele2 Italy had more than 2.6 million customers as at June 30, including over 400,000 broadband customers. Tele2 Spain had 550,000 customers at the same date, including more than 240,000 broadband customers.

Vodafone has said it will operate an "asset light" strategy towards broadband expansion, but also that it would buy assets where it made sense.

A company spokesman said the low broadband penetration in Italy and Spain, compared with markets such as Britain, meant these deals fell into that category.

He also said Vodafone expected regulatory approval of the deals by the end of this year.

A source familiar with the matter told Reuters on Tuesday that Vodafone was the frontrunner to buy Tele2 Italy after Italian rivals Tiscali and Fastweb had withdrawn from the race, though at that time Italian telecoms group Wind was also said to be still interested.

Tele2 has already sold subsidiaries worth at least 6.9 billion Swedish crowns this year in a move to overhaul its portfolio and refocus on profitable broadband and mobile assets.

"As an important step in our realignment strategy, Tele2 has decided to take advantage of the consolidation processes currently taking place in the Italian and Spanish telecommunications markets in order to realise value," Tele2 President and CEO Lars Johan Jarnheimer said in a statement.

($1=.7088 Euro)

($1=6.505 Swedish Crown)