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Malta: Melita, Vodafone quad-play merger

In a move that creates a new, fully-integrated communications provider in Malta, Apax Partners Midmarket, Fortino Capital and Vodafone Group are to combine cable, broadband and pay-TV provider Melita and Vodafone Malta.

The transaction combines Vodafone Malta, the country’s leading mobile operator with a 4G mobile network covering 99 per cent of the Maltese population, with Melita’s cable, broadband and pay-TV network covering 99 per cent of Maltese households. Melita offers a wide range of rich content and superfast broadband download speeds of up to 250mbps.

The combined company’s mobile and enterprise business will operate under the Vodafone brand, distribute a wide range of services including Vodafone’s global portfolio of products and services and benefit from access to Vodafone’s extensive expertise in mobile and fixed operations worldwide.

The combination will create a new fully integrated communications company with the scale and resources required to offer competitive ‘quad play’ bundled mobile, fixed broadband, fixed telephony and TV services to Maltese consumers and a full range of enterprise services for businesses and the public sector.

In a market where demand for converged services is accelerating rapidly, the pair say the combined company will be in a stronger position to compete with the fully integrated incumbent, GO, ensuring sustainable consumer choice over the long term.

The combined company is expected to be able to generate cost synergies through the rationalisation of overlapping activities and greater network investment efficiency as it introduces 4.5G, and subsequently 5G, mobile networks and gigabit-capable fixed networks.

At completion, the current shareholders of Melita will own 51 per cent of the combined company and Vodafone Europe, the current shareholder of Vodafone Malta, will own the remaining 49 per cent.

The transaction values Vodafone Malta at an enterprise value of €208 million, equivalent to multiples of 6.8x EV/2016 EBITDA and 15.1x EV/2016 OpFCF. The transaction values Melita at an enterprise value of €298 million, equivalent to multiples of 8.9x EV/2016 EBITDA and 15.3x EV/ 2016 OpFCF.

At completion, the combined company’s net debt is expected to be approximately €345 million and Vodafone will receive an estimated cash payment of €120 million which will be used for general corporate purposes. Melita’s shareholders will receive an estimated cash payment of €33 million.

The combined company will not be consolidated in Vodafone’s accounts and will be reported on an equity accounting basis after completion of the transaction. The transaction is not expected to have a material impact on Vodafone Group’s free cash flow or earnings.

The Melita shareholders intend to appoint the current CEO of Melita, Harald Rösch, as CEO of the Combined Company and Vodafone intends to appoint the current CFO of Vodafone Malta, Caroline Farrugia, as CFO of the Combined Company. Vodafone will announce a new role for Amanda Nelson, the current CEO of Vodafone Malta, in due course.

The transaction is conditional on approval from the Malta Competition and Consumer Affairs Authority and is expected to close in the second half of the 2017 calendar year.

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