The British fund Zegona buys 100% of Vodafone Spain for 5,000 million

Vodafone’s business in Spain had been hanging in the balance for months and finally this Tuesday the acquisition by the British fund Zegona of 100% of the operator’s subsidiary was announced. The purchase was signed in exchange for 5,000 million euros and means that after 22 years of operations in our country, Vodafone Spain changes hands in order to revive the business.

Thus begins a new stage for the telecommunications market in Spain, also coinciding in time with the upcoming merger between Orange and MásMóvil, which will reorganize the entire sector and make competition more intense. For the moment the operator will continue with the same name, since the agreement includes a clause that allows Zegona to use the Vodafone brand in Spain for ten years after signing.

Who will lead the new company? The intention of the British fund is to sign the former CEO of Jazztel and Euskaltel, José Miguel García, as the new CEO. His forecast is that the operation will be closed in the first quarter of 2024 after receiving the green light from the Government, according to what Zegona’s CEO, Eamonn O’Hare, said at a press conference this Tuesday. Furthermore, in terms of regulations, they will also need the National Markets and Competition Commission (CNMC) and the European Commission to give their approval to the purchase, which can take about four months.

The agreement includes a license so that the firm can continue using the Vodafone brand for ten years

«We have a couple of things that we need to resolve before completing the operation (…) We have to apply through the foreign direct investment regime in Spain. We have been through that before, when we got involved in Euskaltel and Telecable, so we understand that process and we will have respect for that process in the Spanish environment,” explained O’Hare.

The 5 billion euros that Zegona will pay for Vodafone correspond to 3.9 times the operator’s Ebitda, and the investment group explained that it will finance the purchase through a combination of new debt and a capital increase. It has committed to financing the operator’s debt for a value of 4.2 billion, a loan that the fund has obtained through a consortium led by Deutsche Bank.

«We are very excited about the opportunity to return to the Spanish telecommunications market. This attractive acquisition represents our third operation in Spain, after the success of Telecable and Euskaltel. With our clearly defined strategy and proven track record, we are confident of creating significant value for shareholders,” said the CEO of Zegona.

The signing also includes other transitional and long-term agreements between Vodafone and Zegona for services including access to contracting, IoT (internet of things), mobile roaming and operator services, the firm adds.

4,000 jobs in the air

At the moment it is not known what will happen to the almost 4,000 Vodafone Spain workers. The operator did not want to comment on this point and Zegona did not detail what the short-term plans are with the current Vodafone workforce. It was only five months ago that the operator had announced that it would cut 11,000 jobs in Europe and that it was putting the Spanish subsidiary “under review” due to its disappointing results in recent times.

Asked about this matter, although O’Hare did not rule out that there will be layoffs, he emphasized that there are other ways to reduce costs from a business point of view beyond reducing the workforce. “We see a lot of opportunities everywhere to make the business more productive, simplify it and make it much less complex,” he insisted.

The results had been complicated for some time. In the third quarter, the Spanish subsidiary, which accounts for 10% of the group’s total income, lost 87,000 mobile customers and 65,000 broadband customers, partly due to the decision to raise rates last January due to the high inflation. In total, the operator has 13.5 million mobile customers and 2.9 million broadband customers in Spain, while in television the user base fell to 1.4 million after losing 33,000 customers.

With the appointment of the new CEO in Spain, Mario Vaz, the aim was to reformulate the operator’s strategy to consolidate a management model that boosts the business. The new CEO had chosen Federico Colom a few months ago as the new Director of Strategy and Transformation, precisely to accelerate the company’s commercial competitiveness. Colom was the financial director of Orange Spain who piloted the merger agreement with MásMóvil.

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