Zegona ‘remains committed’ to Euskaltel as transformation gets underway

UK-based telecom investor Zegona Communications has said it remains committed to its investment in Spanish telecom operator Euskaltel and it retains the support of its shareholders in viewing the stake as strategic and likely to realise value.

Reporting its H1 financials, Zegona, which has been trading at a discount to the value of its stake in Euskaltel – its principal asset –  said that shareholders recognised the stake had strategic value and that Euskaltel’s transformation from a regional to a national player in Spain was still at an early stage.

Zegona said that the size of its stake, giving it two seats on the Euskaltel board, meant that it could influence the Spanish operator’s future direction and that this gave the stake a value over and above its current market value, particularly if Euskaltel were to become involved in a consolidation play in Spain.

Zegona also said that Euskaltel’s “transformation is still at an early stage” in a growth plan “in line with Zegona’s strategy for the business”.

The UK outfit said it had sought feedback from its own shareholders about whether it should, for example, distribute its shares in Euskaltel to its stockholders to realise additional value, but that shareholders were “encouraged by the early progress being made” and did not want Zegona to distribute its stock at this time.

Zegona posted a profit of €7.1 million for the first half, down from €33.7 million last year, which it said was due to a change in the status of the Euskaltel stake from a financial asset carried at fair value to a strategic stake as it gained influence over the direction of the company.

Zegona’s posting of its financials come as Euskaltel embarks on a promotional drive, offering a quad-play package for only €19 for the first three months, alongside a mobile offering, OSOA Infinity, with unlimited data.

The quad-play package combines 100Mbps broadband, 10GB of mobile data, fixed telephony and Euskaltel’s TV Ocio offering with an Android 4K set-top, which the company described as “the best offer in the market”.