By Paul Sandle
LONDON (Reuters) -Vodafone will sell its Spanish business to Zegona Communications for 5 billion euros ($5.30 billion) in the second major deal by its new CEO to revamp a company struggling with little growth in mature markets.
Vodafone Chief Executive Margherita Della Valle, who has vowed to reshape the UK telecoms group to make it more profitable, said the sale would enable it to focus its resources in markets with “sustainable structures and sufficient local scale”.
Vodafone said it would receive at least 4.1 billion euros in cash. It will also provide 900 million euros in financing in the form of preference shares redeemable no later than six years after closing.
Shares in Vodafone opened up 1.3% following news of the Spanish disposal.
Since being named permanent CEO in April, Della Valle has focused on turning around Vodafone’s performance. While it remains one of the world’s biggest telecoms companies, with a presence across Europe and Africa, it has struggled to grow.
She announced the long-awaited 15 billion pound ($19 billion) merger of Vodafone’s UK mobile operations with those of CK Hutchison in June, a deal aimed at creating a new market leader to drive competition and investment in Britain.
The Spanish transaction marks the latest part of the plan to streamline the company’s assets after shares slid to 20-year lows earlier this year, and follows Della Valle’s announcement in May of 11,000 job cuts.
SPANISH MARKET
Britain’s Zegona, which has previously bought and sold telecoms assets in Spain, said it would fund the deal through 4.2 billion euros in new debt, the Vodafone financing and an equity raise of up to 600 million euros.
Vodafone ranks third in Spanish telecoms after Telefonica and Orange. The latter is combining with the fourth largest player MasMovil.
Vodafone has struggled to grow in the highly competitive Spanish market, and Della Valle launched a strategic review of the Spanish unit earlier this year.
Zegona’s Chairman and CEO Eamonn O’Hare said he was “very excited” about the opportunity to return to the Spanish telecoms
market.
“This financially attractive acquisition marks our third deal in Spain after successful turnarounds at Telecable and Euskaltel,” he said.
“With our clearly defined strategy and proven track record, we are confident that we can create significant value for shareholders.”
($1 = 0.9427 euros)
(Additional reporting by Yadarisa Shabong in Bengaluru and Sarah Young in London; Editing by Subhranshu Sahu, Kate Holton and Susan Fenton)
