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Zegona Communications sells Telecable

The narrative is dominated by the sale of Spanish telecommunications business Euskaltel
October 3, 2017

When its full-year results were released in April, the focus of Zegona Communications (ZEG) was on cable telecommunications operator Telecable. This is once again the case in these half-year results, but for a very different reason. Zegona has now sold the company to fellow Spanish telecommunications business Euskaltel for €177m (£157m) in cash, with further deferred payments of up to €15m. The company has also received 26.8m shares in Euskaltel, representing 15 per cent ownership of the combined group.

IC TIP: Hold at 171p

Zegona bought Telecable in 2015 with the idea that the three independent northern Spanish cable telecommunications operators could one day combine, ergo management's declaration that the sale of Telecable “turns our vision into reality”. The sale should herald a new chapter for Zegona, but since Telecable was its only operating business, both revenues and costs for the current and prior periods are now classified as discontinued operations.

Analysts at JPMorgan expect EPS of 0.03¢ in the year to December 2017, although this estimate was made when Telecable was still fully owned by Zegona.

ZEGONA COMMUNICATIONS (ZEG)  
ORD PRICE:171pMARKET VALUE:£334m
TOUCH:168-173p12-MONTH HIGH:185pLOW: 111p
DIVIDEND YIELD:1.2%PE RATIO:na
NET ASSET VALUE: 179¢NET CASH:€1.1m
Half-year toTurnover   Pre-taxEarnings perDividend
30 Jun(€m) profit (€m)share (¢) per share (¢)
2016-4.6-4.6-1.22.25
2017-6.1-6.0-2.6nil*
% change
Ex-div:na   
Payment:na   
£1=€1.127 *Dividends are expected to resume following a tender offer at £2 a share