Zegona's frenetic year at Vodafone

On June 1, 2024, the British company Zegona took control of Vodafone Spain for €5 billion, marking its first year as owner.

Since the arrival of the company, led by Eamonn O'Hare, and the appointment of José Míguel García—a very expeditious executive—as CEO of the Spanish firm, the telecommunications company has launched a rapid-fire flurry of changes in an effort to improve its competitive position. This has resulted in a frenetic first year in terms of new developments and decisions.

Upon arriving at Vodafone, he launched a collective redundancy plan for 1,200 employees, 37% of the workforce, which was ultimately reduced to 900, 26%. As with almost all decisions made since then, the goal was to improve and streamline the structure, compared to the previous, rigid way of working, where any decision required weeks of discussions with the parent company.

Furthermore, the company decided to reposition its commercial offering, both retail and wholesale. In the latter case, Vodafone had voluntarily remained outside the wholesale market and had few associated virtual operators, so its wholesale revenues, which at Masorange and Telefónica represent around 20%, were marginal.

The first sign of this new policy was immediate, also in June 2024, with the signing of a contract with Andalusian company Procono (PTVTelecom), taking away from Masorange a portfolio of some 350,000 mobile customers and 150,000 fixed broadband customers.

The other major commercial network leasing agreement signed at this stage has been less successful, as it involved Finetwork. Vodafone's relationship with Finetwork has deteriorated dramatically, leading the virtual operator to stop paying its lease, leaving a debt of approximately 65 million euros, which increases monthly.

Finetwork, which is also claiming 150 million euros from Vodafone, has entered into pre-bankruptcy proceedings, and many experts believe it will eventually be controlled by Vodafone, as the company capitalizes the debt.

In the consumer segment, Vodafone redesigned its offering by eliminating temporary discounts and launching more competitive rates under its Vodafone brand, lowering the entry price for fixed-mobile services from €50 to €35.

This strategy has stabilized the customer base, according to data from the CNMC. Since June of last year, it has once again seen positive net additions in fixed and mobile services—albeit at modest rates—with the exception of the last quarter of 2024, when the group removed all Finetwork customers from its user base, which became a full-fledged MVNO.

Its most controversial move has been the relaunch of Lowi, its low-cost brand, which it aimed to directly challenge Digi on price—lowering its fiber and mobile offering from €30 to €20 per month—and expanding it with 5G and TV. But some observers point out that this offensive only encouraged Digi to lower its prices even further—it already offers fiber for €10—putting even more pressure on the low end of the market.

At the organizational level, it has launched VPLAT, a new center in Valladolid that will employ up to 400 people and is focused on improving the sales experience through artificial intelligence. It has also created VSALES, a subsidiary dedicated to managing the direct sales force and improving customer relationship management.

'Fibercos' and consolidation

Furthermore, Vodafone has abandoned its cable network inherited from Ono. The telecommunications company has created two wholesale FTTH fiber companies (fibercos) with Masorange (Surf, serving 12.2 million homes) and Telefónica (Fiberpass, serving 3.65 million homes), to which it will transfer its customers and intends to sell stakes to financial partners in order to reduce its debt and repurchase the €900 million in redeemable preferred shares that Vodafone Group still controls. These shares, if executed, would give the British company control of the company again.

But the investor acquisition processes for both have been delayed compared to the initial schedule, and potential valuations have been lowered, as funds' appetite for fiber networks has waned. All in all, the search for an investor for Surf appears to be entering its final stages.

The other major recent issue has been the possibility of Telefónica acquiring Vodafone. The markets have bought into the idea, and Zegona's stock—whose sole asset is Vodafone Spain—has tripled in value from 254 pence on May 31, 2024, to the 738 pence it closed at yesterday. But the revaluation itself—yesterday it was worth almost €6.6 billion, to which debt must be added—makes a purchase difficult. And Zegona has always said it wants to remain in the company and list its stock in Spain. Any alternative is possible in the coming months.