Analysis and Opinion by Diego García del Río: Zegona Communications Plc ($ZEG)

Introducing Zegona Communications Plc ($ZEG), an opportunity with a profile of asymmetric value and corporate restructuring, derived from the acquisition of Vodafone Spain and its operational integration process. I, Diego García del Río I analyze it below.

Before we begin, it is important to note that it is a publicly traded company. London Stock Exchange (LSE), where prices are expressed in pennies, GBX (Great Britain Pence Index) or GBp (Great Britain pence), while the transactions are carried out in pounds sterling (GBP). Therefore, a quotation of 1000 GBX/GBp is equivalent to 10 GBP, i.e., if a share shows a price of 1000 GBX, its actual value is 1,000 pence and the purchase or sale amount will be 10 pounds sterling.

I leave you a table with the current price and the target price. I, Diego García del Río, estimate these targets based on medium/long term potential:

*Price targets are based on market potential, revenue projections and regulatory approvals, with upward adjustments for successful launches, but subject to industry risks.

This analysis addresses its immediate catalysts, key metrics and market outlook, with a focus on high-potential speculative opportunities.

Before we begin, it is important to note that it is a publicly traded company. London Stock Exchange (LSE), where prices are expressed in pennies, GBX (Great Britain Pence Index) o GBp (Great Britain pence), while transactions are carried out in pounds sterling (GBP). Therefore, a quotation of 1000 GBX/GBp is equivalent to 10 GBP, i.e., if a share shows a price of 1000 GBX, its actual value is 1,000 pence and the purchase or sale amount will be 10 pounds sterling.

Zegona Communications Plc (ZEG)

About Zegona Communications Plc (ZEG), is a telecommunications company operating primarily in Spain following the acquisition of Vodafone Spain in May 2024, focuses on the provision of broadband, mobile, television, voice, data and value-added products for B2C and B2B markets, headquartered in London, UK, and was founded in 2015. 

$ZEG: Fundamental and Potential Evaluation

The company has a market capitalization of 9,418M GBP, based on 759.21M shares outstanding. Over the past 52 weeks, the stock has ranged from £2.92 to £13.50, reflecting significant volatility, which is reinforced by a beta of 3.09, indicating a high sensitivity to market movements.

Financial performance shows revenues of GBP 2,028M, with a net loss of GBP 294M, resulting in a negative price-to-earnings (P/E) ratio of -31.3x, The company is currently in a loss-making situation even with revenues far outpacing its losses. Compared to peers, which exhibit a P/E of 0.0x, and the sector with 7.0x, ZEG has a less favorable valuation due to its lack of profitability. The enterprise value to EBITDA ratio (EV/EBITDA) is 17.0x, higher than the 1.3x of peers and 1.8x of the sector, suggests to me a high valuation relative to operating cash flow.. The company reported an EBITDA of GBP 768.7M million, with a gross profit margin of GBP 1,631M, although operating efficiency is affected by a negative price-to-sales ratio (P/S) of -0.41, compared to 0.0x for peers and 1.5x for the sector. Unfortunately returns on assets are not available, however, the return on invested capital (ROIC) is negative at -14.6%, compared to -1.3% for peers and 1.6% for the sector, reflecting a low return on capital employed..

The balance sheet indicates a market capitalization that is fully aligned with current data, with a absence of positive earnings growth, The average of the two sectors is 0.11x, as opposed to 0.11x for the peers and 0.01x for the sector. The valuation seems reasonable (from my point of view), with a one year variation of 281.7%, 30.1% of the pairs, and a variation with respect to alpha of 1275%, which is higher than the 30.1% of the pairs. gives me the impression of an undervaluation or inefficiency of the market.. On liquidity indicators include a trading volume of 172,608 shares and a three-month average volume of 374,526 shares, nothing to say about this. It currently pays no dividend, and therefore the payout ratio is zero, consistent with reinvestment and debt management strategy.

Its current financial position is characterized by a debt of GBP 4,309M against cash reserves of only GBP 228.79M, resulting in a current ratio of 0.54.. It has a high level of leverage, combined with a projected EBITDA decline of 148.6%, highlights significant financial risk. In comparison, I see peers show revenue growth of 7.8% and the sector of 2.6%, while ZEG reports no measurable growth (NM)., and net income growth is negative -294M GBP, compared to -2,723M GBP from peers and 196,879M GBP from the sector. No detail on ZEG's total assets, even with peers reporting 2,571B GBP and the sector 75,649M GBP.

Analyst consensus gives a predominant «Buy» rating and price targets between GBP 9.36 and GBP 17.24 per share., suggests upside potential from the current closing price of 12.10 GBP. The analysts' target upside is 42.5%, versus 38.4% for peers and 24.4% for the sector. The Spanish telecom market is projected at USD 23.5 billion by 2025 and growing to USD 25.8 billion by 2028, supports direct growth potential for ZEG. 

$ZEG: Catalysts - Potential Value Triggers

On the potential catalysts of Zegona Communications Plc ($ZEG) I highlight the following:

Speculated sale of data centers (Q4 2025): Rumors indicate that Zegona is considering divesting the five data centers acquired with Vodafone Spain., potentially worth hundreds of millions of euros (market estimates ~500M EUR). This would free up non-operating capital to reduce debt or shareholder returns, optimize FibreCos' post-monetization balance sheet and attract institutional interest in an expanding data center market. (planned acquisition of 100 centers in 2025 by competitors).

Speculation on acquisition by Telefónica (Q4 2025-Q1 2026): Persistent rumors suggest Telefónica could raise up to EUR 14,000M for acquisitions in Spain, with Vodafone España (Zegona) as the main objective (vs. DIGI, which prefers to grow organically or IPO in 2026). This would generate massive synergies (redundancies in infrastructure/personnel, ~5,600M in offsettable tax losses, lower churn), valuing Zegona at 15-20 GBP/share (EV ~6-7,000M EUR). Obstacles include regulators, public opinion, and politics, but circumstantial evidence (visits to the EU Commission, sectoral discussions) indicates mutual interest, a deal would accelerate if Zegona moves forward with RANco commitments.

RANco speculative opportunity (2025-2026): Speculation points to joint venture to monetize mobile networks (RAN) with MasOrange or Telefónica, similar to FibreCos, potentially generating billions in proceeds. (debt + sale of stakes). Rumors since January 2025 suggest negotiations to share infrastructure, unlocking post-fiber value and attracting tower investors (e.g., talks with Vantage Towers on tower fees). This could be repeated with data centers, positioning Zegona as an efficient «buy-fix-sell» in European telecom.

Speculated additional monetization of remaining FibreCos (Q4 2025): Following Surf's closing with GIC (25% sold, ~5,300M EUR debt, ~1,400M upfront for Zegona), rumors suggest extra sales on Fiberpass (with Telefónica, ~300-500M additional) or residual stakes in Surf (Zegona retains 10%). This could add up to a total of 1.7-2.4 billion, enabling RPS rescue (~1,400M for dividend of 1.5 GBP/share) and deleveraging (~600M), concentrating value in common shares and potentially driving buybacks or yield ~18%.

Post-AGM capital allocation policy (Q4 2025): Speculation following the September 24, 2025 AGM indicates imminent announcement of «shareholder-friendly» dividends upon approval of the cancellation of the share premium account (~1,200M EUR, expected end-October). This would unlock distributable reserves, facilitating RPS redemption and possible buybacks, with management highly incentivized to raise the share price (low multiples: EV/EBITDAaL ~4.69x).

Transition to profitability and analyst upgrades (2026): Operational turnaround speculations (customer stabilization, EBITDAaL >1,400M EUR, FCF ~800M run-rate) could attract ratings upgrades from relevant analysts (e.g., Santander at GBP 11.80, CaixaBank at GBP 10.70), revaluing in a market valued in the tens of billions, driven by >300 efficiency initiatives.

$ZEG: Revaluation Scenarios

Zegona's revaluation potential is based on the possible outcomes derived from the aforementioned catalysts, factors and operating conditions which, depending on their degree of materialization, can determine different valuation levels and target prices in the short/medium/long term. Here the following:

Successful integration of Vodafone Spain: The acquisition of Vodafone Spain in May 2024 for EUR 5 billion is the strategic pillar of ZEG. Efficient integration to improve EBITDA margins (currently at 768.7M USD with a margin of 80.7%) and reduce operating costs could boost investor confidence. Reported progress, such as an EBITDA margin of 35% in Q1 FY26, suggest initial progress. Rumors indicate a 55% increase in operating cash flow and renewed customer growth., This reinforces ZEG's Buy-Fix-Sell model, with asset sales already reaching EUR 1.4 billion.

Rumors of a sale of Vodafone Spain to Telefónica: There are reports that Telefónica is seriously considering a bid for Vodafone Spain, with the backing of its key shareholders, as part of its strategy to consolidate in Europe and strengthen its dominant position in Spain (where Telefónica leads with 30-40% shares in mobile and fixed). This transaction, which could value Vodafone Spain at a higher multiple than the acquisition by ZEG (around 5x EBITDA), align with ZEG's Buy-Fix-Sell model and generate a significant profit for its shareholders.. Still, it would require regulatory approvals and possible remedies such as asset sales to avoid a duopoly with MasOrange. If it materializes, this could boost ZEG's valuation by 200-500% in the near term, similar to previous transactions in the sector.

Strategic agreements and expansion: The FibreCo agreement with MasOrange to expand fiber optics and the bid for Excom are positive catalysts. If these alliances or acquisitions materialize, ZEG could consolidate its position in the Spanish market, projected at USD 23.5 billion by 2025 and USD 25.8 billion by 2028., leveraging a penetration of 90% in connections. There are also rumors suggesting that ZEG and MasOrange are actively competing for Excom, a smaller telecom operator, which could generate additional synergies and strengthen market share.

Debt management and cash flow generation: With debt of USD 4,309M and cash of USD 228.79M (current ratio of 0.54), the ZEG's capacity to refinance debt or generate operating cash flow (estimated at 625-687.5M EUR per year) is critical. An improvement in this area could reduce the perceived risk. Potential issues include the sale of mobile network infrastructure in conjunction with MasOrange, which could inject significant capital and optimize the balance sheet.

Asset sale considerations: The possible sale of data centers, could inject liquidity and improve the balance sheet, strengthening the financial position and attracting investors. Currently, there are rumors that point to the evaluation of the sale of five Vodafone Spain legacy data centers, which could be valued in the hundreds of millions and act as an immediate catalyst for revaluation.

$ZEG: Target Prices and Potential Scenarios

Considering that Zegona will complete the integration of Vodafone Spain with significant operating synergies and expansion through Excom, in addition to the sale of data centers and infrastructure by among 300-400M USD, The funds will be used to reduce debt and improve the EBITDA margin, along with the possibility of a preliminary agreement with Telefónica, either a call option or joint venture (which would serve as a key catalyst for the stock), an optimistic scenario being the target price would be 20.76 GBPwhich would imply a upside of +71.6%, supported by a valuation around 4x EBITDA and the high rank of analysts.

In a standardized scenario with an integrated partially successful, with a progressive advancement in synergies and the materialization of the FibreCo agreement (it would provide stability in cash flow), the sale of data centers for ~250M USD would generate additional liquidity, although with no concrete progress in a major transaction with Telefónica, under this scenario, being a normalized scenario, the target price would be 15.43 GBP, which would be a upside of +27.5%, consistent with moderate organic growth and a valuation that is in line with the consensus average, whereas with difficulties in the integration of Vodafone Spain, delays in strategic agreements and a increase in the cost of debt, while rumors of a sale to Telefónica would remain stagnant, putting pressure on margins and market confidence. target price would be 9.68 GBP, equivalent to a downside of -20.0%.

$ZEG: Technical Analysis - Rising Channel and Positive Momentum

Zegona has a sustained upward trend within a ascending channel well-defined. The price remains above the EMAs long placists, confirming the structural strength of the momentum, using the EMA 50 as support and decreasing selling pressure.

The momentum indicators I use confirm the strength of the movement. The RSI and the MACD reflect a downward trend.

Regarding technical standardsthe supports are located in 11.83 GBP and 10.75 GBP, while the primary resistance appears in 13.50 GBP. 

ZEG maintains a buy bias with solid momentum and low technical risk, mainly supported by rising averages. The trend will remain intact as long as the price is sustained over 11.83 GBP.