(Bloomberg) -- Billionaire Xavier Niel is making a fresh attempt to combine his Italian telecommunications business with Vodafone Group Plc’s local operations, which his bid values at at €10.45 billion ($11.4 billion). 

Niel’s Iliad and Vodafone would initially each get 50% of the share capital of the new venture, the French company said in a statement on Monday. The offer would also give Iliad the option to buy 10% of the combined company’s shares annually, paving the way to full control.

Vodafone said in response that it’s exploring options with “several parties” in Italy about combining the business with another company or selling it outright, though there’s no certainty it will reach a deal. 

Vodafone had rejected an €11.25 billion bid for its Italian unit last year from an Iliad-backed consortium, saying the offer wasn’t in shareholders’ best interests. Still, Vodafone CEO Margherita Della Valle, who took the top job in April, is facing a declining share price and pressure to sell or merge underperforming units. Fastweb, owned by Swisscom AG, had also explored a deal for Vodafone’s Italian unit.

Vodafone shares rose 6.2% to 68.73 pence at 10:55 a.m. in London trading, after earlier gaining as much as 6.9%, the biggest intraday move since 2020.

Under Iliad’s proposed deal, Vodafone would receive €6.5 billion in cash and a €2 billion shareholder loan. Iliad Italia would be valued at €4.45 billion, and receive €500 million in cash and a €2 billion shareholder loan. Iliad would get to pick the combined business’s chief executive officer and chief financial officer. 

Read More: Iliad, Vodafone Are Said to Revive Talks on European Tie-Ups 

Carriers all over Europe are working to combine to mitigate heavy competition and low returns. In June, Vodafone and CK Hutchison Holdings Ltd. agreed to combine their UK mobile businesses in a deal still waiting for regulatory approval. In October, Vodafone agreed to sell its Spanish business to Zegona Communications Plc in a €5 billion deal. 

What Bloomberg Intelligence Says:

Iliad’s offer to merge with Vodafone in Italy implies a 7.8x trailing Ebitdaal multiple which looks worth evaluating to us, given it’s about the midpoint of the 5-11x range of comparable deals. By absorbing a disruptive challenger, with sizable synergy potential, the transaction — valued at €10.5 billion — also promises to address the low-returns challenge. The proposal allows for Iliad to acquire the unit fully via call options in five years, which may need to be renegotiated.

— Erhan Gurses, BI telecoms analyst

Italy is one of the most competitive telecommunications markets in Europe, where monthly subscriptions for full-fiber landline services, which usually include unlimited Internet, are priced as low as €20 to €25. That’s about a quarter of what most US consumers pay. This is in part due to Iliad, which moved into the Italian mobile market in 2018 as a no-frills challenger, sparking a price war.

Niel had earlier bought a stake in Vodafone and had said that he supported the carrier’s intention to merge with rivals in markets such as the UK and Italy, as well as separate out infrastructure assets like towers and fiber optic networks. Niel’s Iliad has operations in France, Italy and Poland, and is looking to grow its operations across Europe, with a playbook of disrupting well-established players with low consumer prices and lean company costs. 

More than a fifth of Vodafone shares are now owned by rival telecom operators. Niel has said he owns 2.5%, Liberty Global Plc owns 4.9%, and Abu Dhabi’s Emirates Telecommunications Group Co. owns 14.6%, according to data compiled by Bloomberg.

--With assistance from Daniele Lepido.

(Updates with Vodafone’s response in third paragraph. A previous version of the story was corrected to say that Niel took a stake in Vodafone last year.)

©2023 Bloomberg L.P.