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Vodafone: Appointment of new Spanish CEO could trigger strategic pivot – bankers

The appointment of a new CEO for Vodafone's [LON:VOD] Spanish business could serve as a trigger for the company to reconsider its position in that market, bankers familiar with the company said. 

Vodafone Spain's CEO Colman Deegan is stepping down from 31 March, and the telco is still seeking a successor. In January it appointed former finance director Margherita della Valle Group CEO, as reported.

A full exit from Spain should not be ruled out, one banker pitching solutions to Vodafone said. This would allow the company to avoid costly 5G investments and instead concentrate on a leadership position elsewhere, he argued. There have been rumours that Vodafone could consider a Spanish exit, a second banker pitching solutions said.

In a trading update last month, della Valle said Vodafone is focused on four markets; Italy, Portugal, Spain and the UK, and that consolidation will be a plank of her strategy. Vodafone is reportedly nearing a tie-up with CK Hutchison’s [HKG:0001] British unit Three UK and weighing options for its African business. Elsewhere, this news service’s Flash column has argued that Liberty Global’s [NASDAQ:LBTYA] recent stake acquisition in the UK telco could lead to a deal for its Dutch JV Vodafone Ziggo.

Amidst the potential for dealmaking elsewhere, the entry of a new Spanish CEO would be a logical time for Vodafone to sell its business in that country, the first banker said.

If private equity funds could get Vodafone’s Spanish business cheaply enough, they could build an attractive position through M&A or network-sharing agreements with Telefonica [BME:TEF] or Orange [EPA:ORA], this banker suggested. Spain is evolving into a situation where these two operators will be the main infrastructure players, with others sharing networks with one of them, he noted.

Regulators might push back against that kind of consolidation, a third banker pitching solutions cautioned. Companies may resist regulatory pressures, and the appointment of a new Vodafone Spain CEO would be “the perfect time” for a strategic pivot, he conceded. Still, it would be better for Vodafone to make a large one-off writedown on its Spanish exposure and then enter a network sharing agreement with one of the local rivals to save costs, he argued.

Vodafone, which reported EUR 957m Spanish EBITDA in the year to March 2022, is the country’s third operator after Telefonica and Orange, with a 15.6% market share in terms of retail revenues per 3Q22. The market is already consolidating, as reported, with Orange seeking to merge its Spanish business with sponsor-backed operator MasMovil. Vodafone said last month its 3Q22 service revenue in Spain fell 8.7% from a year earlier, weighed by price competition.

If Vodafone doesn’t exit Spain, its best option could be to reach a network-sharing deal with Telefonica or Orange, the first banker conceded, regardless of whether it finalises a potential sale of its own infrastructure assets in the country.

Infrastructure sale prospects

According to local press reports, Vodafone has been exploring a sale of its Spanish infrastructure, with an asking price around EUR 4bn and Evercore handling the transaction. Telecoms group Onivia’s main owner Macquarie Capital and Adamo’s owner Ardian have been interested, according to press reports last month.

This potential sale process is ongoing, a source familiar with the situation said. However, media coverage has been “a little over-excited”, a second source said. The process remains active but is moving slowly, with Vodafone still considering its options. The list of potential bidders circulating in the press is not particularly reliable, he added.

Vodafone’s infrastructure sale talks have been going badly, the first and third bankers agreed, adding that valuations have been challenging for the buyside.

A spokesperson for Vodafone declined to comment. Evercore and Macquarie Capital declined to comment. Ardian did not respond to requests to comment.