Zegona enters deal to acquire Vodafone Spain

Almost six months after Vodafone chief executive Margherita Della Valle announced sweeping changes would take place at the telco to simplify the organisation, cut out complexity and regain competitiveness after financial results she called “not good enough”, it has announced binding agreements with European telecommunications, media and technology investment house Zegona for the acquisition of 100% of Vodafone Holdings Europe, SLU, Vodafone Spain, in a deal valued at €5bn.

Boasting three strong brands and a highly converged customer base, Vodafone is said to be the number-three player in Spain, with significant market shares in mobile, broadband and TV, and is regarded as a leading integrated operator with strong market positions in both consumer and business-to-business (B2B) segments.

It’s also said to be a high-scale business with significant cash flow potential, set to end the 2023 financial year with €3.9bn revenue, €1.3bn EBITDAaL and €400,000 in cash flow. Its gigabit-capable fixed network passes 10.7 million homes, with around 95% access coverage, and it has a 4G/5G mobile network described as having spectrum advantage in the country.

The acquisition marks Zegona’s third deal in Spain after successful turnarounds at Telecable and Euskaltel. Assessing what the deal could mean for the company, Zegona said it offered the opportunity to deliver significant value for Zegona shareholders, transforming the business to deliver “exceptional” service to customers and attractive returns for investors, improving efficiency by reducing complexity, and driving productivity and stabilising revenues with new commercial initiatives.

Zegona proposes appointing former Jazztel and Euskaltel CEO José Miguel García as chief executive of Vodafone Spain.

“We are very excited about the opportunity to return to the Spanish telecoms market,” said Zegona chairman and CEO Eamonn O’Hare. “With our clearly defined strategy and proven track record, we are confident that we can create significant value for shareholders.”

Zegona said it will fund the acquisition through a combination of new debt, Vodafone financing and a new equity raise, and the company has entered into committed debt financing of €4.2bn and a committed revolving credit facility of €500m.

Post-equity raise, the new debt facility is anticipated to deliver a net debt position of €3.7bn. Zegona added that it anticipates an equity raise of up to €600m from third-party investors to be executed before the completion of the deal.

For its part, Vodafone will provide up to €900m financing and a brand licence agreement which permits Zegona to use the Vodafone brand in Spain for up to 10 years post-completion.

Vodafone and Zegona will enter into other transitional and long-term arrangements for services including access to procurement, internet of things, mobile roaming and carrier services.