Vodafone Group Public Limited Company (LSE:VOD) and iliad S.A. are in talks to strike a deal in Italy that would combine their respective businesses in a bid to end cut-throat competition in the euro zone's third-biggest economy, sources familiar with the matter told Reuters. Discussions between the two companies are ongoing and both parties are actively studying ways to clinch a tie-up of their respective businesses in Italy, the sources said, speaking on condition of anonymity. Iliad, which will make its wireline broadband debut in Italy on January 25, 2022 is working with investment bank Lazard on its strategic plans in Italy, one of the sources said, cautioning that a deal was not certain.

If successful, a deal would create a telecoms powerhouse with a mobile market penetration of about 36% and combined revenues of nearly €6 billion ($6.80 billion). Iliad and Vodafone declined to comment while Lazard was not immediately available for comment. Iliad, led by billionaire founder Xavier Niel, has been reviewing options to further expand in Italy in recent months as it seeks to take advantage of deal fever in Italy's telecoms industry to accelerate consolidation and cease a price war that has been slashing its margins, the sources said.