UK telecoms group, Vodafone, is set to sell its Vodafone Spain to Zegona Communications for 5 billion euros ($5.30 billion), as CEO, Margherita Della Valle, works to increase the telecom giant’s growth in mature markets.
Since she assumed her position in January 2023, Margherita Della Valle, has made a commitment to enhance Vodafone’s profitability. She has focused on turning around underperforming markets, announcing 11,000 job cuts in May, and the merger of Vodafone’s British unit with CK Hutchison’s Three in June.
Della Valle highlighted that the deal with Zegona Communications was a strategic move that would allow Vodafone to concentrate on markets with “sustainable structures and sufficient local scale.”
Zegona Communications, a London-listed company led by telecoms executive, Eamonn O’Hare, has previously engaged in the acquisition and divestment of assets in Spain, including regional operator, Euskaltel.
O’Hare believes that though Vodafone Spain has strong brands and networks, it requires a remedy for its low cash flow margin and declining revenue. He expressed confidence in Zegona’s plan for the Vodafone’s Spanish business, which includes appointing former Euskaltel CEO, José Miguel García, to manage the operations. O’Hare emphasized the need to reverse the revenue decline and strive for growth.
The financing for this acquisition involves 4.2 billion euros in debt, led by Deutsche Bank, and 900 million euros from Vodafone in preference shares that can be redeemed no later than six years after the deal’s closure. Additionally, O’Hare intends to raise up to 600 million euros in equity from Zegona’s shareholders, contributing to reducing the debt and leverage.
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Despite the positive development, Vodafone’s shares, which are expected to receive at least 4.1 billion euros in cash from the deal, has traded down by 1%, despite initially seeing gains. The company’s stock has been hovering near 20-year lows.
In the Spanish telecoms market, Vodafone holds the third position after Telefonica and Orange, with the latter in the process of merging with the fourth-largest player, MasMovil.
O’Hare has expressed enthusiasm for reentering the Spanish telecoms market, considering the acquisition to be financially attractive. He highlighted that this marked Zegona’s third deal in Spain, following successful turnarounds at Telecable and Euskaltel. O’Hare also mentioned the potential for Zegona to wholesale Vodafone’s fixed and mobile networks, indicating a willingness to collaborate with Orange, MasMovil, and Telefonica to maximize asset utilization.
