Mobile giant confirms it will sell Vodafone Spain to Zegona for $5.3 billion (£4.4bn), in another restructuring move by new CEO
Vodafone has undertaken another major restructuring change under the leadership of its new chief executive officer.
Vodafone announced that it will exit the Spanish market, after entering “agreements with Zegona Communications plc (“Zegona”)1 in relation to the sale of 100 percent of Vodafone Holdings Europe SLU (“Vodafone Spain”).”
This is another strategic move by Vodafone’s chief executive officer Margherita Della Valle, who was confirmed in the top role this year after former CEO Nick Read announced last December he was stepping down.
In May this year Vodafone said it had embarked on a “new roadmap” when it confirmed it would axe 11,000 jobs.
Vodafone had employed 104,000 people worldwide before those cuts.
Then in June Vodafone announced it will merge its UK operation with Three UK.
Vodafone UK will own 51 percent of combined entity, and the merger will allow it to present an improved challenge to local players EE and O2.
Now the mobile giant is exiting the Spanish market.
Zegona is funding the deal with 4.2 billion euros in debt led by Deutsche Bank, and 900 million euros from Vodafone in preference shares.
Vodafone will also provide certain services to Vodafone Spain for a total annual service charge of €110 million for services such as sourcing smartphones.
“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,” said Margherita Della Valle.
“I would like to thank our entire team in Spain for their dedication to our customers and relentless determination to improve our organic performance,” said Della Valle. “However, the market has been challenging with structurally low returns.”
“My priority is to create value through growth and improved returns,” said Della Valle. “Following the recently announced transaction in the UK, Spain is the second of our larger markets in Europe where we are taking action to improve the Group’s competitiveness and growth prospects.”
Vodafone and Zegona will also enter into a brand licence agreement, which permits the use of the Vodafone brand in Spain for up to 10 years post-completion.
Vodafone and Zegona will enter into other transitional and long-term arrangements for services including access to procurement, IoT, roaming and carrier services.
According to Reuters, Vodafone ranks third in Spanish telecoms after Telefonica and Orange. Orange is combining with the fourth largest player MasMovil.
Vodafone was (at one stage) the world’s largest mobile operator (in terms of revenue), before it sold off its hugely valuable 45 percent stake in Verizon Wireless in the United States.
But it has struggled in its traditional strongholds of Europe, amid intense competition, difficult regulatory environments and falling legacy revenue.