LONDON: Zegona Communications plc (LSE: ZEG) announced Vodafone ONO, S.A.U. (Vodafone Spain) and Telefónica de España, S.A.U. have today signed a binding contract to create a new fibre network company in Spain.

Earlier this year, Zegona announced it had signed non-binding agreements to create FibreCos with both Telefonica and MasOrange and a non-binding agreement for a new fibre wholesale agreement with Telefonica. 

The combination of these three transactions was designed to complete the transformation of Vodafone Spain’s fixed line strategy, delivering full “Fibre-to-the-home” services nationally across Spain. Today’s announcement delivers a key component of that strategy.

This new FibreCo will cover 3.6 million premises across Spain, providing fibre access services for 1.4 million Vodafone Spain and Telefonica customers.

FibreCo will provide access to the highest quality high-speed fibre optic network and support the rapid adoption of new technologies, benefiting Vodafone Spain and Telefonica customers.

Vodafone Spain will use FibreCo to provide services to its existing and future retail and wholesale customers within its footprint. This network will be a benchmark for sustainable development, meeting high ESG standards through more efficient use of network assets.

The FibreCo is expected to have run rate EBITDA of circa €125 million after 3 years. The ownership split of the company will be 63% Telefonica and 37% Vodafone Spain.

The Parties plan to bring a third-party financial investor into the share capital of FibreCo, with Telefonica retaining majority ownership and Zegona holding 10%. Given the high quality of the existing fibre infrastructure and the multi tenant nature of the company, we expect FibreCo to be a highly valued asset commanding a significant valuation premium.

The transaction is subject to customary regulatory approvals. FibreCo completion together with the introduction of a third-party investor is expected in the first half of 2025.

Eamonn O’Hare, Chairman and CEO of Zegona, commented “Entering into this FibreCo partnership with Telefonica demonstrates our commitment to transform Vodafone Spain’s fixed line strategy. This transaction gives our business guaranteed access to a future-proof all fibre network with attractive economic terms. Creating and monetising this FibreCo is expected to deliver significant capital returns to Zegona creating value for all stakeholders.”

Zegona Communications to acquire Vodafone Spain for €5.0 billion