Capacity first reported that Zegona and Vodafone were in discussions about a deal last month, with JB Capital and Apollo Global Management also in the running.
Today though, it was Zegona that announced it has agreed to acquire the struggling Vodafone Spain business, that was placed under strategic review by group CEO Margherita Della Valle in April amid fierce price competition.
Zegona will acquire 100% of the Vodafone business, with the €5 billion price tag representing a multiple of 3.9x EBITDAaL.
Zegona will fund the acquisition through a combination of new debt, Vodafone Financing and a new equity raise.
Vodafone will provide 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 also enter into other transitional and long-term arrangements for services including access to procurement, IoT, mobile roaming and carrier services.
“Vodafone’s exit from Spain can be traced back to its failure to secure a deal with rival operator, MasMovil,” Kester Mann, Director, Consumer and Connectivity at CCS Insight, a telecoms and technology research firm, told Capacity.
Back then, Vodafone were valuing their Spanish business at €7.5 billion.
“Vodafone’s retreat from Spain comes as little surprise,” Mann continued. “Spain has long dragged Vodafone’s financial performance due to intense market competition and low returns. As such, the disposal is likely to be welcomed by its long-suffering shareholders.”
Zegona on the other hand see Vodafone’s Spanish business as an “opportunity to deliver significant value” to its shareholders.
Specifically, Zegona pointed to Vodaofne’s position in the Spanish market as a leading integrated operator with strong market positions in both consumer and B2B segments.
Zegona said that Vodafone has three strong brands in the mobile, broadband and TV markets, and that it had a highly converged customer base.
It also highlighted Vodafone’s gigabit capable fixed network passing 10.7 million homes with access to over 95% coverage, and its high-quality mobile network, that it said had a 4G/5G spectrum advantage.
Zegona plan to transform the Spanish business by appointing José Miguel García as its new CEO,
improving efficiency by reducing complexity and driving productivity and stabilising revenues with new commercial initiatives.
Garcia is Zegona’s go-to-man to transform its acquired businesses, as the board of their previous Spanish investment, Euskatel, appointed him CEO in 2019.
Vodafone will also be happy with the reduced complexity of its global operation, now without Spain to worry about.
“Today’s news is the first major tangible evidence of De Valle’s priority to slim down, refocus and cut debt. She will now be hoping to build on the Spain exit by securing vital regulatory approval to merge with Three in the UK,” Mann concluded.
