Vodafone Malta to merge with cable operator Melita

Vodafone Group, along with Apax Partners Midmarket SAS and Fortino Capital, announced an agreement to combine Melita and Vodafone Malta on Wednesday.

The FTSE 100 telco said the transaction would combines Vodafone Malta, the country's “leading mobile operator” with a 4G mobile network covering 99% of the Maltese population, with Melita, the cable, broadband and pay television provider, with a network covering 99% of Maltese households.

Melita offers a wide range of rich content and superfast broadband download speeds of up to 250mbps, Vodafone explained.

The combined company's mobile and enterprise business would 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, it added.

“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,” the Vodafone board said in its statement.

“In a market where demand for converged services is accelerating rapidly, 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 the combined company introduces 4.5G, and subsequently 5G, mobile networks and gigabit-capable fixed networks.”

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

The transaction valued Vodafone Malta at an enterprise value of €208m, equivalent to multiples of 6.8x EV/2016 EBITDA and 15.1x EV/2016 OpFCF.

Vodafone said the transaction valued Melita at an enterprise value of €298m, 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 €345m and Vodafone will receive an estimated cash payment of €120m which will be used for general corporate purposes.

“Melita's shareholders will receive an estimated cash payment of €33m.”

The combined company would not be consolidated in Vodafone's accounts and would be reported on an equity accounting basis after completion of the transaction, Vodafone confirmed.

It said the transaction was 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.

“Vodafone will announce a new role for Amanda Nelson, the current CEO of Vodafone Malta, in due course.”

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