"Zegona's management team has a deep knowledge of the Spanish telecommunications market and a proven track record in the execution of telecommunications transactions, and complements Vodafone España's experienced management team. Zegona has been centrally involved in the operation of multiple telecommunications businesses and has improved the commercial profile and at the same time generated returns for shareholders". Direct and without half-tones. With this paragraph, included in the official communication of the purchase of Vodafone España for 5,000 million euros, the British investment fund Zegona set out the keys to its return to the Spanish market. Repeat the moves he already made in 2015 with the purchase of the Asturian operator Telecable, which merged with Euskaltel in 2017.
For this reason, he proposes as leader of his operation at Vodafone España José Miguel García, a historian of the telecommunications sector, founder of Jazztel and who was already in charge of Euskatel before the sale to MásMóvil in 2021. "More beyond the details that we can find out later, it is clear that they go to all of them. They aim to maximize the value of the company no matter what. García's choice says it all. He has shown that he is an expert when it comes to generating aggressive market strategies and growing the companies he has been in: Jazztel, Euskaltel... with this alone he has already put all the competitors on their guard", explain sources from the sector
An aggressiveness that has even led him to propose an option that almost no one anticipated in the Spanish market. The possibility of derailing what is, until now, the star operation: the merger between Orange and MásMóvil. In its communication, Zegona expressed its interest in merging Vodafone and MásMóvil in the event that Brussels does not approve the operation. He has valued the synergies of the merger at 450 million euros and assures that he wants to take advantage of them if the opportunity arises.
"The whole sector is waiting for Brussels to announce the remedies (assets from which Orange and MásMóvil must be divested in order to obtain the go-ahead). I don't think that this merger would fail. But of course, Vodafone has been to these meetings and has more information. That's why his announcement undoubtedly generates unease", point out the consulted sources.
"Another option is that the purchase of Vodafone accelerates Brussels' decision, to ensure that the new group can start operating against a competitor that is strengthening", points out Rubén Blanco, head of telecommunications and media at the consultancy NNT Data for Spain and Latin America.
Be that as it may, Zegona returns to Spain and is ready to repeat the move it already made when it bought the Asturian operator Telecable and the Basque Euskaltel. Zegona recalls those successes in its official communication to the London stock exchange. Between 2015 and 2021, the entry and exit dates of its previous foray into the Spanish market, Zegona generated an 87% return on net invested capital for its shareholders.
How does he intend to do this with Vodafone, the company that has been penalized the most in the low cost war that has been waged in Spain for the past few decades? "The most important thing is that the new management will focus and concentrate on the needs of the local market, Spain. Something that the Vodafone Group had not achieved in recent years. We are starting to see very aggressive offers in the residential market, where they have a lot of strength and have agreed to keep the Vodafone brand, which is very powerful. Despite the weakness of recent years, it remains the third company in the sector", explains Rubén Blanco.
A third position that gives it 22% of the mobile market five percentage points from the first operator, which is Telefónica. After the merger between Orange and Más Móvil, which would rise to first place with almost 43%, it would also have a third position, but much further away from the leader.
To avoid this, Zegona is ready to act on several fronts. The first, the high value residential market, the world of convergence. In the last year, the Spanish operators had managed to stop the price war and, thanks to the multiplication of added services (insurance, alarms, loans...), also stop the continuous changes of companies so common among customers in Spain.
Now the new Vodafone will attack this market with force. Declared objective: "Increase the market share of the value segment of the Spanish market". Your cards to get it? "It is the only actor in Spain that integrates all the main OTT platforms, including Disney, Amazon Prime, HBO and Netflix", he says in his official statement. "The fund has assured that it will make more offers with added services, to increase customer loyalty, reduce turnover and increase profit per customer (ARPU)", explains Blanco.
In the low cost market, Lowi, one of Vodafone's brands, will help. "Let Digi prepare", they point out from another company in the sector. Digi, the fifth operator in Spain, has been one of the most aggressive brands in terms of offers. The only one that was not added to the general increase in prices last year, the one that aims to expand its low cost market with fiber and television, to gain weight also in the world of convergence, and the one that has the most customers achieved since the beginning of the year.
But Vodafone could also be interested in an agreement with Digi in another area, and open access to its fiber. Because another of the strategies he will develop is to put to "work" all the fiber he bought from ONO in 2014 for 7,200 million (remember that Zegona will now pay 5,000 million for the entire company). Of this entire fiber network, barely a quarter is in operation, as acknowledged by the CEO of Zegona, Eamonn O'Hare, in a press conference on Tuesday.
Its wholesale business contributes barely 4% to revenue. "Until now Vodafone had never left its networks for virtual operators. This was one of their biggest mistakes", points out an expert in telecommunications regulation. Doing so can change positions especially in the residential market. "If it offers a cheaper network than Telefónica or Orange, there may be virtual operators that change when their contracts allow it", they explain in the sector. Digi could be one of them, the operator of Romanian origin could reconsider slowing down investment in its own fiber network and reach an agreement with Zegona. "Vodafone's network, originally from ONO, is a bit old, updating it to make it competitive would require between 300 and 600 million", they point out in the sector. Maybe too much for Zegona in this operation, but less than doing a new network like Digi is doing now. And together they will have more strength in the deployment of 5G", point out experts consulted.
It is not the only option. There are operators specializing in networks such as Onivia, for example, for whom buying Vodafone's excess network would be interesting. In fact it is, because they were already talking about it before Zegona's entrance. Now, its CEO, O'Hare, ruled out its sale on Tuesday. He wants to make it profitable, but from the sector a sale is seen as the best formula to get the financing he needs to cover the 5,000 million without taking on excessive debt.
"It is clear that it needs cash, among other things because it seems that there is also a possible merger with Finetwork on the market. If he manages to reduce the debt to 2,500 or 3,000 million, it will be a success", point out financial sources
A whole range of possible moves for which we will have to wait until 2024, when Zegona will receive authorization from the Spanish authorities to start operating.
