LONDON/MILAN, Nov 14 (Reuters) – British telecoms group Vodafone (VOD.L) said it was considering a range of options for Italy, the last of the “challenging” markets it has vowed to tackle, after a return to growth in Germany in the second quarter boosted its top line.

CEO Margherita Della Valle said her steps to simplify the company and focus on customers had delivered growth in 14 out of 17 markets. Spain and Italy remained the exceptions in Vodafone’s major markets.

Vodafone announced the sale of its Spanish business last month for 5 billion euros, after agreeing in June to merge its UK unit with Hutchison’s Three.

Della Valle said she had flagged three markets that would benefit from consolidation in May, and action had been taken in two of them.

“No operator in Italy delivers returns in excess of cost of capital, no one,” she told reporters.

It was a “very different” situation from Spain, she said, pointing to the strength of its brand and network. The market itself needed action, she said.

“We are considering a range of options,” she said. “We don’t have deadlines, we don’t have time lines.”

Vodafone executives are examining possible options including a sale or joint venture for its Italian operations, two people familiar with the situation told Reuters, speaking on condition of anonymity.

Operators in Italy are studying ways to consolidate a market grappling with shrinking revenue and margins, which is depriving investors from any return on capital.

Potential candidates for a deal with Vodafone include French rival Iliad, which last year tabled a 11 billion euro bid for the asset, according to other sources.

Iliad said on Tuesday it had gained 382,000 new subscribers in Italy in its third quarter, its best performance for three years.

A spokesperson for Iliad declined to comment, although its CEO Thomas Reynaud told reporters on Tuesday: “If there is consolidation in Italy, we want to participate actively.”

Newspaper Il Sole 24 Ore said at the weekend that Swisscom’s Fastweb could be another potential buyer for the business.

Della Valle declined to comment on speculation about either company. A Swisscom spokesperson also declined to comment.

Vodafone reported a 4.2% rise in group service revenue for the six months to the end of September, with 4.7% growth in the second quarter after 3.7% in the first. A 0.3% rise in adjusted half-year core earnings was limited by higher energy costs.

It reiterated its guidance for full-year earnings to be broadly flat at around 13.3 billion euros ($14.2 billion).

Shares in the group, which have fallen 26% in the last 12 months, reversed early gains to trade down 2.5% by lunchtime.

($1 = 0.9346 euros)

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