Vodafone to Sell Ailing Vodafone Spain to Zegona for €5 bn

Telecom giant Vodafone Group has announced a significant deal to sell Vodafone Spain to Zegona Communications for a cash consideration of €4.1 billion, coupled with the potential issuance of Redeemable Preference Shares worth up to €0.9 billion.
Vodafone store UK
As at 31 March 2023, Vodafone Spain had gross assets of €7.6 billion. For the 12-months period 31 March 2023, Vodafone Spain generated a loss before tax of €383 million.

The agreement, which has been finalized between Vodafone and Zegona, includes a provision under which Vodafone will continue to provide certain services to Vodafone Spain, subject to an annual service charge of €110 million.

This transaction is valued at a total enterprise value of €5 billion, representing a multiple of 5.3 times Adjusted EBITDAaL and 12.7 times OpFCF (Operating Free Cash Flow) for the 12-month period that concluded on March 31, 2023.

Margherita Della Valle, Chief Executive of Vodafone, expressed her views on the sale, saying, “The sale of Vodafone Spain is a key step in right-sizing our portfolio for growth and will enable us to focus our resources in markets with sustainable structures and sufficient local scale. The market has been challenging with structurally low returns. My priority is to create value through growth and improved returns.”

As part of the agreement, Vodafone and Zegona will also enter into a brand license arrangement. This agreement will allow Zegona Communications to utilize the Vodafone brand in Spain for a duration of up to 10 years following the completion of the sale. Additionally, the two companies will establish other transitional and long-term arrangements for services, including access to procurement, IoT (Internet of Things), roaming, and carrier services.

This strategic move marks an important shift in Vodafone’s global portfolio management, as they continue to optimize their assets to drive growth and profitability in key markets. The deal with Zegona Communications underscores the changing dynamics in the telecommunications industry and the importance of consolidation and strategic partnerships in adapting to evolving market conditions.