The British telecommunications giant Vodafone Group PLC (GB:VOD) has agreed to divest its Spanish subsidiary, Vodafone Holdings Europe, S.L.U., to Zegona Communications PLC (GB:ZEG), marking its exit from the Spanish market. The transaction is valued at €5 billion, which includes €4.1 billion in cash along with €0.9 billion in redeemable preference shares. Zegona intends to utilize debt facilities amounting to €4.2 billion to fulfill the cash consideration.
Vodafone is a leading European telecommunications company, offering a wide range of services such as voice, messaging, and internet for fixed and mobile networks.
According to this deal, Vodafone will offer specific services to Vodafone Spain for €110 million annually. The agreement also allows Zegona to use the Vodafone brand in Spain for the next 10 years after the completion of this deal.
Following the announcement, the Vodafone share price traded down by 1.21% yesterday.
End of Pain in Spain
The deal marks the second move by Vodafone’s new CEO, Margherita Della Valle, to revive the company by exiting mature markets with limited growth potential. Before this, Valle had disclosed the merger between Vodafone’s UK mobile operations and CK Hutchinson in June, aiming to boost competition and stimulate investment in the market. Valle remains committed to reshaping the company to stimulate growth. She emphasized that this sale would allow Vodafone to concentrate on markets characterized by “sustainable structures and sufficient local scale.”
The agreement aligns with the company’s decision, considering its challenges in the Spanish market. Vodafone had been facing difficulty enhancing its performance in Spain, prompting Valle to conduct a strategic market review earlier this year.
Vodafone Share Price Forecast
After the deal announcement, analyst Andrew Lee from Goldman Sachs confirmed his Buy rating on the stock yesterday, predicting an upside of more than 50% in the share price.
Similarly, UBS analyst Polo Tang also recommended buying the stock at a forecast of 32% growth in the share price.
On TipRanks, VOD stock has a Moderate Buy rating based on a total of nine recommendations. This includes three Buy and four Hold ratings from analysts. The Vodafone share price target is 104.14p, which is 38% above the current trading level.
