After more than a month of market speculation, the British investment fund Zegona announced yesterday that it is acquiring 100% of the shares of Vodafone Spain for 5,000 million euros.
The operation has been closed following an agreement according to which the Vodafone Group will provide a loan of up to €900 million through an investment in preferred shares in a newly created entity, EJLSHM Funding Limited, which will use the funds to subscribe for new ordinary shares of Zegona. Vodafone undertakes not to exercise its voting rights in Zegona and this fund to redeem these shares within a maximum period of six years.
For its part, Zegona will carry out a capital increase of 600 million and will allocate all the amount it is able to raise in the market above 400 million to refinance the debt contracted with Vodafone.
Zegona hopes to close the operation in the first quarter of 2024, after obtaining the relevant authorization from the Spanish Government. From then on, the objective is to “optimize all the company's current assets,” as Eamonn O'Hare, founder and CEO of the fund, confirmed yesterday to journalists. “We see many opportunities in Vodafone Spain if the company is managed well. 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 O’Hara.
To generate this value, Zegona wants to put José Miguel García at the head of Vodafone Spain, one of the most highly valued managers in the telecommunications sector in Spain and with extensive experience linked to Zegona.
The fund was the owner of the Basque operator Telecable and later a majority shareholder in Euskaltel until it sold its stake to MásMóvil in 2021. García was in charge of these investments. “Betting on him is a declaration of intentions. He is an executive who has a reputation for being very aggressive in the commercial field. If he is in charge, the market can prepare for a whole war of offers, promotions, packages with multiple services,” industry sources explain.
In any case, the challenge ahead is titanic. Vodafone carries a large burden derived from one of the most erroneous decisions in the sector in Spain, the acquisition of Ono's fiber network for 7.2 billion euros in 2014. Nine years later, the entire company is only worth 5,000. “The network is underused, with a penetration of 20-25%, which is not very efficient, so we have to find a way to obtain more value, optimize it and increase traffic,” acknowledged the CEO of Zegona yesterday.
The Vodafone Group put its Spanish division up for sale last May after years of falling profits and loss of customers in Spain. The agreement announced yesterday guarantees that, despite the change of ownership, the brand will remain in Spain, at least for the next decade.
Currently, Vodafone Spain has about 13 million mobile customers in Spain, almost 3 million fiber customers and 1.5 million television customers, which is added to its own network that serves 11 million homes. Its turnover is around 4,000 million euros annually and the gross operating profit (ebitda) is around 950 million.
The big question about this operation for the sector is how Zegona is going to finance the remaining 3.6 billion to close the operation. “It cannot be ruled out that it gives entry to other interested funds such as RRJ or that it sells part of the assets,” say sources in the sector.
