LONDON (AP) — British cellphone company Vodafone confirmed Friday that it is selling its Italian business to Switzerland's Swisscom for 8 billion euros ($8.7 billion) and will hand back half of the proceeds to its shareholders through the buyback of company shares.

Vodafone said the move, with talks first announced Feb. 28, represented an "attractive valuation" and marked the final step of its strategy to sell off parts of its European portfolio.

Swisscom, a telecoms operator, will pay in cash that it will finance through new debt. It is aiming to merge its acquisition with Fastweb, the company's subsidiary in Italy. It said the deal will help it unlock 600 million euros in savings and will enable the combined entity to sustain investments and offer improved services.

"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 stakeholders."

As part of the deal, which is expected to be completed by the end of the first quarter of 2025, the two firms agreed that Vodafone will continue to provide "certain services" to Swisscom over the next five years. Swisscom will pay annual initial charges of 350 million euros, which is expected to decrease over time.

Vodafone added that the two companies also are "exploring a closer commercial relationship to enable collaboration across a broad range of areas, beyond Italy."

Vodafone Chief Executive Margherita Della Valle said the sale "creates significant value for Vodafone and ensures the business maintains its leading position in Italy."

Vodafone has been looking to free up cash and improve its financial performance by selling off parts of the business, including its Spanish arm, having previously struck deals to sell its divisions in Hungary and Ghana.

The markets appeared to welcome the deal, with Vodafone's shares up 5% in lunchtime trading in London and Swisscom's up 4% in Zurich.

"Vodafone's Italian business has been struggling, so shedding this weight should help the group refocus," said Sophie Lund-Yates, lead equity analyst at stockbrokers Hargreaves Lansdown. "Attention will now turn to how effectively Vodafone uses its resources to fix wider challenges, including high debts, costs and some increasing competition. "

Its refreshed strategy also has seen it seek to merge its U.K. business with Three U.K. to create Britain's biggest mobile phone network worth around 15 billion pounds ($19 billion). The proposed tie-up will face regulatory scrutiny over competition concerns.