Image source: © 2025 Krish Capital Pty. Ltd.

Highlights:

  • ZEG acquired Vodafone Spain in May 2024, aligning reporting calendar and functional currency to euro.
  • Zegona FY25 EBITDAaL reached EUR 1.25 billion, with margin rising to 34% and cost reductions underway.
  • Vodafone Spain customer base returned to growth, with both broadband and mobile lines increasing

Zegona Communications plc (LSE: ZEG) has released its Annual Report for the 15-month period ended 31 March 2025, a transitional reporting window reflecting the company’s acquisition of Vodafone Spain in May 2024. The results include 10 months of operations for Vodafone Spain and mark the initial impact of Zegona’s transformation plan for the business. The acquisition of Vodafone Spain was the central focus of the period. The company adjusted its financial year-end from 31 December to 31 March to align with Vodafone Spain’s reporting calendar. Zegona also adopted the euro as its functional currency following the transaction. Since taking ownership, Zegona has concentrated on four key areas: customer retention and acquisition, cost restructuring, infrastructure efficiency through FibreCos, and building a streamlined organisational structure.

Customer metrics showed early signs of improvement, with broadband lines growing by 29,000 in the last three quarters of FY25 to reach 2.56 million. In the first quarter of FY26, an additional 7,000 lines were added. Contract mobile lines also grew by 26,000 during the same period, ending FY25 at over 10 million, with a further 39,000 added in the first quarter of FY26. The company attributed this growth to revised commercial offerings, brand repositioning of Lowi, insourced customer care, and churn control programmes. For the 12 months ending March 2025, EBITDA after leases (EBITDAaL) totalled EUR 1.25 billion, with a margin of 34% up more than 2 percentage points from pre-acquisition levels. Zegona implemented over 400 operational and financial initiatives during FY25, with 300 more initiated in FY26. These included renegotiation of supplier contracts, rationalisation of leases, IT system integration, and a 28% reduction in headcount.

Cash flow from operations (EBITDAaL – Capex) reached EUR 625 million for the 12-month period, a 55% increase from the prior year. Cash flow margins improved from around 10% to over 17% year-on-year, and further strengthened to more than 22% in Q1 FY26, with EUR 201 million generated. Zegona implemented a flatter and restructured management team at Vodafone Spain, with Jose-Miguel Garcia appointed as CEO. The revised structure prioritises cost control and faster execution. The company reported improved employee engagement indicators since the changes.

To address infrastructure inefficiencies, Zegona launched two FibreCos aimed at delivering full-fibre broadband services and reducing capital intensity. The Telefónica FibreCo began operations in March 2025, covering nearly 4 million premises. A second joint venture, MasOrange FibreCo, aims to reach over 12 million premises, making it one of Europe’s largest fibre entities. Zegona is currently in the process of monetising its interests in both ventures, noting advanced debt arrangements including a €4.7 billion offer for MasOrange FibreCo.

ZEG trading at GBX 740.00 per share as on 16 July 2025.