The deal values Vodafone’s Spanish unit at over €5 billion, according to sources

Late last month, European telecoms investment firm Zegona Communications confirmed that it had entered negotiations with Vodafone to acquire a full or partial stake in Vodafone Spain. At the time, negotiations were notably in the early stages, with Zegona also in discussions with a consortium of banks to secure funding for the potential purchase.

Now, according to anonymous sources speaking to Bloomberg, negotiations are close to reaching a positive conclusion, with Zegona set to buy a stake of at least 50% in Vodafone Espana.

The deal would reportedly value the Spanish telco at over €5 billion.

Vodafone has been struggling in the highly competitive Spanish market for some time now, bleeding subscribers to its local rivals in the mobile, fixed broadband, and converged consumer segments.

As a result of its poor performance, the company has long been linked to potential tie-ups with the other Spanish operators, particularly Orange and the slightly smaller MasMovil.

However, hopes of consolidation were dashed last year when it was announced that Orange and MasMovil would instead seek to merge with each other, leaving Vodafone with the unenviable prospect of competing against the newly combined entity as well as current market leader Movistar (Telefonica).

This merger is currently bogged down in regulatory investigations over competition concerns, though a glimmer of light at the end of the tunnel emerged last week when Romania’s Digi Group was tipped as the potential buyer of assets that Orange and MasMovil would be forced to divest in order to get the deal greenlit.

Without the potential for meaningful consolidation, Vodafone has instead been forced to look towards a full or partial sale to ease the woes of its Spanish unit. This potential sale has brough numerous interested parties to the negotiating table in recent weeks, with RRJ Capital, Warburg Pincus, Apax, and Apollo Global Management all in discussions in parallel to Zegona.

The exact form the investment from Zegona will take is unclear. On the one hand, it could take the form of a 50:50 joint venture, a move that could give the telco a much-needed financial boost but would still leave the company dragging on Vodafone’s balance sheet. On the other hand, the prospect of Zegona buying the telco outright would likely see Vodafone laden with additional debt, with local media suggesting that Zegona would require Vodafone to provide them a loan of around €900 million to finance the purchase.

But despite any potential reservations about the form of a deal might take, Zegona’s track record in Spain will likely reassure Vodafone. The company, which was founded by former Virgin Media executives Eamonn O’Hare and Robert Samuelson back in 2015, is perhaps best known as the part-ownership of Basque cable operator Euskaltel, which it ultimately sold at profit for $2.24 billion to MasMovil back in 2021.

With MasMovil and Orange bogged down in merger discussions and Vodafone potentially involved in a sizable takeover, the Spanish telecoms market could be on the brink of major shakeup.

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