Vodafone could flog Spanish unit for $4 billion

Deal Handshake

Vodafone’s Spanish unit is once again the source of M&A rumours, this time having reportedly attracted the attention buyers that could be willing to pay as much as US$4 billion.

The latest rumour comes from Bloomberg, whose unnamed sources with knowledge of the matter claim Vodafone has been approached by private equity and strategic suitors. The telco group has not formally put its Spanish operations on the block, but would consider offers at the right price, the sources said. That right price could value the company in excess of $4 billion, they suggested.

Then there were the usual caveats about this being an ongoing process and there being no certainty a deal will emerge.

Indeed. We have been here before with Vodafone in Spain. So while it can come as no surprise that the business is again the subject of acquisition talk, given its recent track record within the Vodafone group, this could just as easily come to nothing. That said, it’s probably safe to assume that Vodafone will have to take some decisive course of action with the Spanish business in the not-too-distant future.

Vodafone’s troubles are well documented. It is under pressure from investors to streamline its business at group level and reverse a share price decline that has been underway for a number of years and became particularly acute last year. Spain is one of the major European markets in which Vodafone has struggled of late, intense competition having hit all players there, and recently the operator moved its Vodafone Spain business into its Europe cluster, effectively lumping it in with its smaller markets.

Perhaps pertinently, one of those markets, Hungary, has since been sold to the Hungarian government, which subsequently traded part of the asset for another mobile operator, Yettel. It’s probably wise not to read too much into that, but at the same time, there is a feeling that Spain is no longer a core market for Vodafone.

It had a stab at bulking up in Spain, where it was linked with the acquisition of fourth MNO MasMovil last year. Orange ultimately won out there, brokering a buyout deal in July that is currently going through an in-depth investigation at the European Commission.

On which note, it’s worth pointing out that Bloomberg mentioned strategic buyers showing an interest in Vodafone Spain, but didn’t share any names. We have to presume that there’s no scope for a major in-market deal here though, given that the Orange/MasMovil deal is still in limbo, so any strategic buyer would have to be looking to add Spain to its footprint. The newswire did note that Xavier Niel. e&, and Liberty Global have all bought into Vodafone group as strategic investors in recent months and could have an influence over its direction going forward.

Equally, it did not name any likely private equity buyers either. However, earlier this year Spanish business publication El Economista reported that Maquarie and Ardian were both preparing bids for the telco’s fixed network, placing a value of around €4 billion on that part of the business alone. There’s clearly some disparity in the figures between the reports – time will tell on that score – but there are obviously some big names watching Vodafone Spain.

Naturally, there has been no official comment from Vodafone. The group is in the process of brokering a merger deal with Three in the UK, should the parties reach agreement, and we could well have expected an announcement on that front before now. However, major deals are unlikely to transpire while Vodafone still lacks a leader – it has been four months since Nick Read announced his departure, leaving CFO Margherita Della Valle in an interim role – which means we might have to wait a while longer for any serious action in Spain.


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