Vodafone has sold its Italian business to Swisscom for €8 billion ($8.7bn).

The deal will see Swisscom merge Vodafone with its Italian subsidiary Fastweb.

It's the latest merger announced in Europe this week after the Spanish government approved the proposed Orange and MásMóvil merger.

Vodafone's announcement this week arrives a few weeks after it confirmed it had entered exclusive talks with Swisscom.

Xavier Niel's Iliad had also held an interest in a deal, but Vodafone rejected Iliad Group's proposal.

Swisscom said the deal will be debt-financed and paid for in cash. The merger will combine 3.4 million Fastweb customers with Vodafone's 20 million. It will be the second-biggest telco in Italy behind struggling Telecom Italia (TIM).

“Today, I am announcing the third and final step in the reshaping of our European operations," said Margherita Della Valle, group chief executive, Vodafone.

"Going forward, our businesses will be operating in growing telco markets - where we hold strong positions - enabling us to deliver predictable, stronger growth in Europe. This will be coupled with our acceleration in B2B, as we continue to take share in an expanding digital services market.

"The sale of Vodafone Italy to Swisscom creates significant value for Vodafone and ensures the business maintains its leading position in Italy, which has been built through the dedicated commitment of our colleagues to serving our customers over many years."

Vodafone confirmed that from this sale and the sale of its Spanish arm to UK investment firm Zegona for $5.3 billion, it will pay out $4.36bn to its shareholders.

The telco has focused heavily on consolidation in the past couple of years and is currently waiting to complete a £15bn ($18.5bn) merger in the UK with CK Hutchison's Three.