By Paul Sandle and Muvija M
LONDON (Reuters) - Vodafone (LON:VOD) boss Margherita Della Valle has bagged her first win with a merger deal in Britain, but the time it took to get there and the tortuous road ahead shows the scale of the challenge she faces to turn around the telecoms group.
Della Valle was appointed chief executive in late April, tasked with overhauling the business in key European markets and halt a slide in performance that has left its share price languishing at 25-year lows.
She has struck in Britain first, announcing on Wednesday a 15 billion pound ($19 billion) merger of its UK mobile operations with those of CK Hutchison to form a new market leader.
The two sides first revealed they were in talks in October, 2022. They hope to close the deal, if they can secure regulatory and political approval, by the end of 2024, meaning they must wait another 18 months before any synergy savings or improvement in performance can start to hit the bottom line.
"For Vodafone this transaction is a game changer in our home market," Della Valle, a 29-year company veteran, told reporters. Under the terms, Vodafone could eventually buy out the Hong Kong-based conglomerate if they both agree.
The announcement is likely to bring some relief to a management team that has struggled to get a break in recent months, with weak trading in Germany, Spain and Italy, plus a lack of action on the deal front, leading to former boss Nick Read agreeing to step down last year.
One large institutional investor told Reuters they appreciated the changes Della Valle was pursuing but they had struggled to understand why the British deal had taken so long to come together and said they wanted to see more action soon.
Speaking ahead of the announcement, the investor, who spoke on the condition of anonymity, said the CEO knew she had a year coming up that was "ultimately career defining".
Many investors want Vodafone to replicate similar deals across markets such as Italy and Spain, where fierce competition has eaten into returns at a time when telecom groups are spending heavily to invest in ever faster networks.
That is likely to take time, but Kester Mann, a director at CCS Insight, said the British announcement would give Della Valle a boost.
"She has shown clear intent to make changes at Vodafone as she bids to turn the embattled company's performance around," he said. "Securing approval for a tie-up with (Hutchison's) Three would be a major boost to her early tenure."
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