Vodafone’s (VOD.L) boss Margherita Della Valle is cleaning up the sprawling 21 billion pound telecom group, but it’s a tough job. A potentially messy exit in Spain illustrates the point. Della Valle lacks an obvious partner in the country: local giant Telefónica (TEF.MC) is too big, while rivals Orange (ORAN.PA) and MásMóvil are merging with one another. As a result, Vodafone may have found itself a potentially problematic counterparty for the Spanish business, which Della Valle has put under strategic review.
Zegona Communications (ZEG.L), a London-listed cash shell run by former Virgin Media executive Eamonn O’Hare, is in talks to buy at least half of the Spain unit for an implied overall enterprise value of more than 5 billion euros, according to a Bloomberg report that cited people familiar with the matter. Local newspaper Expansión reported, citing market sources, that Zegona could buy all of the division’s equity – with the help of a debt package from Deutsche Bank (DBKGn.DE), ING (INGA.AS) and UniCredit (CRDI.MI) and a 900 million euro loan from Vodafone itself.
Both options could get messy. Tiny Zegona would have to borrow heavily to buy the whole thing, meaning it would be risky for Della Valle to remain exposed by lending to the buyer. A joint venture, meanwhile, would see a large chunk of the asset remain on Vodafone’s balance sheet until Zegona or another player could afford to buy it outright. That won’t help the parent group’s valuation much. Investors might be reassured that Della Valle is making things happen, but a clean break in Spain looks increasingly unlikely. (By Pamela Barbaglia)
Follow @Breakingviews on X
Capital Calls – More concise insights on global finance:
Aussie tycoon doubles down as lithium spoiler read more
Intel’s reverse bullwhip is strong read more
Oil giants’ wavering discipline read more
Investors reject Sanofi’s cure to sickly valuation read more
Amazon’s grey cloud is the new blue sky read more
