Melita and Vodafone Malta to merge into combined company

Vodafone Malta and Melita are set to merge into a combined company, their shareholders announced yesterday.

“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,” a statement said.

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 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.”

Transaction details

At completion, the current shareholders of Melita will own 51% of the Combined Company and Vodafone Europe BV – the current shareholder of Vodafone Malta – will own the remaining 49%.

The transaction values Vodafone Malta at an enterprise value of €208 million and Melita at an enterprise value of €298 million.

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

GO statement

Noting the development, GO plc said it understands the desire of other operators to consolidate their position in the Maltese market. “Whilst GO is well placed to face such developments, it is naturally important that a fair competitive and regulatory environment is maintained primarily for the benefit of consumers in Malta but also for operators such as GO which continues to make very significant investments in the national telecommunications infrastructure,” it said.

“There are very clear competition rules and precedent which guide regulators in such acquisitions and GO is confident that the relevant authorities will follow such principles throughout this process.”