British telecoms giant Vodafone said Friday it has agreed to sell its Italian unit to Swisscom for eight billion euros ($8.7 billion), completing efforts to overhaul the UK group's European operations.

Vodafone, which previously rejected offers from French billionaire Xavier Niel's Iliad group, has been on a cost-cutting campaign that has included layoffs and the offloading of divisions abroad.

The UK group said it intends to return four billion euros to its shareholders following the sales of its Italian and Spanish businesses, which together total 12 billion euros.

Vodafone chief executive Margherita Della Valle said the deal with Swisscom marked the "third and final step in the reshaping of our European operations".

"Going forward, our businesses will be operating in growing telco (telephone company) markets -- where we hold strong positions -- enabling us to deliver predictable, stronger growth in Europe," she said in a statement.

Swisscom said in a separate statement that it would merge Vodafone Italia with its own Italian subsidiary, Fastweb.

"The industrial logic of this merger is very strong," Swisscom CEO Christoph Aeschlimann said. "Fastweb and Vodafone Italia are an ideal fit to create high added value for all stakeholder."

Vodafone and Swisscom had announced last month that they were in advanced talks for the transaction.

Earlier this year, Vodafone rejected a proposal from Iliad to merge their Italian businesses in a deal valuing Vodafone Italy at 10.45 billion euros.

The British mobile phone operator had already rebuffed an 11.25-billion-euro approach by Iliad and private equity group Apax Partners in February 2022.

Niel has since taken a 2.5-percent stake in Vodafone.

A source close to the matter told AFP last month that Vodafone preferred a deal with the Swiss group because of its "significant cash element" and a higher degree of certainty that the deal could be completed, as it would have a better chance of being approved by Italian regulators.

Della Valle announced the sale of its Spanish division to investment fund Zegona for up to five billion euros.

It followed her decision last year to axe 11,000 jobs, or more than 10 percent of Vodafone's global workforce, to slash costs.

Britain's competition regulator, meanwhile, is investigating Vodafone's plan to merge its British mobile phone operations with those of Three UK, owned by Hong Kong-based CK Hutchison.

Vodafone also completed the sale of its Hungarian unit last year.