Only number three on the market
Vodafone sells business in Spain
October 31, 2023, 1:30 p.m
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The British mobile phone provider Vodafone is streamlining its portfolio. The group is getting rid of its activities in Spain for five billion euros. The market was challenging due to low returns. The new owner faces a lot of work.
In a second billion-dollar deal within a few months, Vodafone is divesting itself of its weakening Spanish business. The financial investor Zegona is taking over the division for five billion euros, the British mobile operator announced. Vodafone will receive at least 4.1 billion euros in cash for the Spanish business. In addition, the British group wants to sell preference shares worth 900 million euros, which will be redeemable no later than six years after the transaction is completed. Shares already traded in London then fell by up to two percent. As part of the deal, Vodafone will provide Zegona with certain services in Spain for around 110 million euros per year.
Zegona boss Eamonn O’Hare expressed confidence that he could breathe new life into Vodafone Spain. However, it will probably take several years. “There is no quick solution. It will be a tough job.” The new Vodafone boss Margherita Della Valle described the sale as an “important step in straightening out our portfolio”. Spain as a market was a challenge due to “structurally low returns”.
The Spanish mobile phone market is highly competitive. Vodafone is number three in the country behind the Spanish Telefonica and the local branch of the French company Orange. Because of bleak growth prospects, Della Valle put the local subsidiary under scrutiny at the beginning of the year. The deal that has now been wrapped up is expected to be completed by the summer of 2024, subject to official approval. The Vodafone brand will be retained for up to ten years.
She has also given the entire company a thorough treatment in order to increase profitability. To do this, it is merging its British mobile communications activities with CK Hutchinson in a deal worth around 17 billion euros. Vodafone is also cutting 11,000 jobs, around ten percent of its workforce. Nevertheless, the shares temporarily fell to their lowest level in almost 26 years in July.