Vodafone Group Plc has agreed to sell its Spanish business to Zegona Communications Plc in a deal valued at as much as €5 billion ($5.3 billion), including debt. Vodafone Spain sale
To finance the deal, Zegona has raised a debt of €4.2 billion and a committed revolving credit facility of €500 million, the company said in a statement. Vodafone will provide as much as €900 million in financing through an investment vehicle, which will buy new shares of Zegona.
Vodafone has been trying to do a deal in Spain for about two years. The Newbury, England-based company’s previous Chief Executive Officer, Nick Read, said the market needed consolidation but ended up on the sidelines as its rivals agreed to merge. Following years of eroding earnings, Read’s replacement, Margherita Della Valle, demoted the unit to Vodafone’s so-called “cluster” of smaller European businesses and placed it under strategic review.
Vodafone, the third-largest operator in Spain, will also give Zegona the rights to use its brand for 10 years, Zegona said in the statement.
Vodafone Spain is strategically attractive: Vodafone Spain sale
• Vodafone is the No. 3 player in Spain, with significant market shares in mobile, broadband and TV
• Scale businesses with significant cash flow potential: FY23: €3.9 billion revenue, €1.3 billion EBITDAaL, and €0.4 billion in cash flow
• Leading integrated operator with strong market positions in both consumer and B2B segments
• Three strong brands and a highly converged customer base
• Gigabit-capable fixed network passing 10.7 million homes with access to c.95% coverage
• High-quality, market-leading mobile network with 4G / 5G spectrum advantage
Telecom Consolidation in Spain: Zegona Leads the Way, Orange Waits for Approval, Telefónica Attracts Investment
London-based Zegona has already played a key role in the sector’s consolidation in Spain. Founded in 2015 and run by former Virgin Media Ltd. executive Eamonn O’Hare, the company bought and sold Spanish operator Euskaltel SA to Masmovil Ibercom SA, a deal that took the market from five players down to four.
Investors are waiting for companies in the highly competitive market to combine, improving the outlook for the telecommunications industry. French operator Orange SA is waiting for regulators to approve its combination with Masmovil, a deal that will further consolidate the market for three major players.
Market leader Telefonica SA has attracted investment from sovereign wealth fund-backed Saudi Telecom Co. and the Spanish government said Tuesday it was also weighing a stake. Telefonica had also approached Vodafone about a potential deal involving internet broadband networks in Spain.