Vodafone Group has agreed to sell its Spanish division to European telecoms investment company Zegona Communications for a price of approximately EUR 5 billion.

Zegona, which was founded in 2015 by Eamonn O'Hare and Robert Samuelson to acquire telecoms assets, will provide at least €4.1 billion in cash. In addition, Vodafone will acquire potential preference shares in Zegona worth up to EUR900 million. The sale represents Vodafone's most significant move yet in reducing its European operations, many of which have underperformed in recent years. Vodafone Spain's revenues, for example, fell 6.5% year-on-year to €3.9 billion.

The Spanish telecoms market, already one of the most competitive in Europe, is set for a major transformation in the coming months. Orange SA and Masmovil Ibercom SA are awaiting regulatory approval for their merger, which will create Spain's largest operator, overtaking Telefonica SA. The European Commission is likely to impose strict conditions on the merger, which may require Orange and Masmovil to divest some assets in favour of a smaller competitor.

The deal includes a licensing arrangement between the two companies that allows Zegona to use the Vodafone brand in Spain for up to ten years after the completion of the transaction.