Navigating the Zegona-Vodafone Deal: Opportunities and Challenges Ahead

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Late in the previous month, a confirmation was made public by the European telecoms investment firm Zegona Communications. It stated that the firm had stepped into the negotiation ring with Vodafone to acquire either a full or partial stake in Vodafone Spain. Talks were in their early stages with Zegona also liaising with a consortium of banks to secure the required funding for this potential acquisition.

According to unidentified sources communicating with Bloomberg, these talks are nearing their culmination with Zegona poised to buy a minimum of 50% stake in Vodafone Espana, valuing the Spanish telco more than €5 billion.

The Pressure on Vodafone

Vodafone has been facing increased competition in the Spanish market, which resulted in the loss of subscribers to its local competitors across various segments including fixed broadband, mobile and converged consumer sections. This performance decline threw Vodafone in the pool of potential collaborations with other Spanish operators like Orange and the slightly smaller MasMovil.

However, any hopes of consolidation were quashed when news broke of Orange and MasMovil planning to merge, putting Vodafone in a challenging position. This merger is presently under investigation due to competition concerns. Digi Group from Romania was tipped as the potential buyer of assets that have to be divested by Orange and MasMovil for the approval of the deal.

Unanswered Questions

The exact form of the investment from Zegona is currently foggy. It might take the shape of a 50:50 joint venture, that can provide a financial uplift for the telco but would likely leave the company burdening Vodafone’s balance sheets. Another possibility, Zegona buying out the telco would possibly add to Vodafone’s debt with hints of Zegona requiring Vodafone to give them a loan of approximately €900 million to facilitate the purchase.

Despite uncertainties over the form of the potential deal, Zegona is assured by its past accomplishments in Spain. Famous for its part-ownership of Euskaltel, a Basque cable operator, Zegona was founded by the former Virgin Media executives Eamonn O’Hare and Robert Samuelson in 2015. The company later sold Euskaltel at a profit to MasMovil for $2.24 billion in 2021.

With ongoing merger discussions between Orange and MasMovil and the potential large-scale takeover of Vodafone, a dramatic reshuffling of the Spanish telecoms market could be in the offing. To join the discussion on how the European telecoms landscape would alter in 2023, partake in this year’s Total Telecom Congress happening live in Amsterdam.

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