As we mentioned a few days ago, MasOrange and Vodafone are preparing to establish a new company with which they hope to become leaders in fibre optics in Spain. They intend to sell 40% of the company to an investment partner. Now we are discovering what the operators’ intentions are for the distribution of part of these revenues.
As detailed this week, the plans that MasOrange and Vodafone have with their new company are based on a very solid project. And, within this project, finding a partner before forming the new entity is essential. For this reason, they are already planning the way in which they will distribute the dividend they will obtain at the time of the operation. This amount will reach a volume of between 4,000 and 5,000 million euros that will be used, above all, to clean up their independent balance sheets.
A total value of between 7 and 10 billion
This is the amount stipulated for the total of the new company, a netCo or fiberCo, with which MasOrange and Vodafone have very solid aspirations. The latest details, as already occurred with the first news on the subject, appear published in Expansión.
It is known, thanks to this, that 70% of the resources will be received by MasOrange, while Vodafone will receive 30% of the same. An estimate made by Barclays had previously appeared with which these data from knowledgeable sources coincide. Therefore, we could already talk about specific amounts that, in any case, would be justified by the contribution of clients to the new company that each of the operators will make.
The accounts of the operation
If the transaction and dividends are stipulated at a value of 5 billion, MasOrange would be able to obtain around 3.5 billion, while Vodafone would pocket 1.5 billion. If the final figure is a little lower, at 4 billion, the amounts would drop to around 2.8 billion and 1.2 billion respectively. To reach this amount and have funds available to share, MasOrange and Vodafone plan to obtain them not only from the amount that the investor they are looking for is going to pay, but also from the debt that this new entity will take on. It should be noted that the plan would be for the new fibre entity to start with 50% of its value as debt, so we would be talking about a significant amount.
The contribution that the partner will make with the acquisition of 40% of the company is estimated to represent an amount between 1.5 and around 2 billion euros. Therefore, the rest of the amount to be distributed will come from the debt that the company will incur, which could be stipulated at an amount of 4 billion euros. This will guarantee that both MasOrange and Vodafone obtain a significant income from this operation and that they can look to the future with a more profitable situation on their respective balance sheets.
As for what they will do with the money they will receive, the main objective, as we said, is to reduce debts so that the balance sheets can be more positive. Vodafone, although it recently enjoyed a capital increase worth 300 million euros, was acquired by Zegona with financing based, for the most part, on debt. As you may remember, it was an operation that had a value of 5,000 million euros. In the case of MasOrange, the net debt that they have revealed in their latest documents shared with the press indicates that it has reached an amount of 14,279 million. Therefore, it is obvious to think that a project of this magnitude would be very beneficial for them.
Furthermore, there is an important aspect that economic experts point out: that the debt that the new company will have from its conception will not be consolidated in the respective balance sheets of the partners who will be in charge of it. The reason for this is that MasOrange will have 50%, while Vodafone and the new partner will together have the other 50%. This will prevent one of the parties from having control over the others, which will facilitate the financial situation we are discussing.
In this way, the launch of the company will provide a significant boost to the accounts of MasOrange and Vodafone and will be set up in such a way that it can grow without negatively influencing them. Furthermore, due to the characteristics and the fact that two of the three major operators in the market work together, its future figures are expected to be very positive. Its plan to become the netCo that will achieve leadership in the sector is by no means far-fetched.
