Zegona Q1 revenue rises as debt and interest costs fall

A solid quarter with improving financial foundations

Zegona Communications has started its 2027 financial year with another quarter of revenue growth, rising customer numbers and a healthier balance sheet.

The owner of Vodafone Spain reported total first-quarter revenue of €916 million, up 2% year on year. EBITDA increased 5% to €465 million, while EBITDAaL rose 3% to €324 million. EBITDA is a measure of operating profitability before interest, tax, depreciation and amortisation. EBITDAaL also deducts lease costs, making it particularly relevant for telecoms businesses that lease network infrastructure and other assets.

This was Zegona's third consecutive quarter of top-line growth. That matters because the company's strategy since acquiring Vodafone Spain two years ago has combined investment in customers with operational efficiencies and stronger cash generation. The latest figures suggest this approach is gaining traction, although investors should note that growth remains steady rather than spectacular.

Zegona's key Q1 figures

Key performance indicator Q1 FY26 Q1 FY27 Reported movement Fixed broadband lines 2.570 million 2.592 million Up 22,000 Mobile lines 12.519 million 12.864 million Up 345,000 Total revenue €895 million €916 million Up 2% EBITDA €442 million €465 million Up 5% EBITDAaL €316 million €324 million Up 3% Operating cash flow €201 million €204 million Increased Net debt €3.6 billion €3.2 billion Down 11% Leverage ratio 2.89 times 2.33 times Lower Customer numbers moved in the right direction across both main categories. Fixed broadband lines reached 2.592 million, while mobile lines rose to 12.864 million.

The mobile total includes contract and prepay customers. Contract mobile lines increased by 126,000 year on year to 10.222 million, from 10.096 million. Customer growth is encouraging because it gives Zegona a larger base over which to spread the relatively high fixed costs associated with running a telecoms network. However, the announcement did not disclose measures such as average revenue per user, customer churn or pricing trends, so it is difficult to judge the quality of that growth in detail.

Cash flow and debt are the bigger story

Operating cash flow increased from €201 million to €204 million, with a margin of more than 22%.

The modest year-on-year increase means cash flow did not rise as quickly as EBITDA. Even so, positive cash generation is important because Zegona continues to carry substantial borrowings following the Vodafone Spain acquisition. Net debt fell by 11% to €3.2 billion. The leverage ratio, which compares net debt with annualised EBITDAaL from the trailing two quarters, declined from 2.89 times to 2.33 times.

That is meaningful progress. Lower leverage gives the company more financial flexibility and reduces the proportion of future cash flow that may need to be directed towards debt reduction. There is an important reporting detail here. EBITDAaL and operating cash flow are reported at the Vodafone Spain level, while net debt is reported for the Zegona Holdco Limited group. Q1 FY27 EBITDAaL for the Zegona Holdco Group was €323 million, and net cash held was €534 million.

Refinancing could save around €60 million a year

The other major development is Zegona's €3.7 billion refinancing, which closed on 14 July 2026. The transaction refinanced all existing senior secured notes and senior facilities and extended the maturity of the capital structure beyond five years.

Zegona estimates that the refinancing will produce annual run-rate interest savings of around €60 million. The company's annual interest cost was €294 million two years ago and had fallen to €230 million by March 2026. Following the refinancing, Zegona expects the annualised run-rate cost to be approximately €170 million.

If achieved, that reduction would leave more cash available for debt repayment, investment in Vodafone Spain or other corporate purposes. It also demonstrates that credit investors were prepared to support the new financing structure. However, the €60 million saving is an estimate rather than a guaranteed figure. It is calculated using Euribor, a benchmark interest rate used across euro-denominated lending, which can move with market conditions. Zegona also notes that its overall cost of debt may change as Euribor changes.

What looks positive for investors?

Several parts of the announcement stand out positively:

• Revenue has now grown for three consecutive quarters.
• Fixed broadband and mobile customer numbers both increased year on year.
• EBITDA grew faster than revenue, suggesting some improvement in operating efficiency.
• Operating cash flow remained above €200 million for the quarter.
• Net debt fell by 11%, while leverage declined sharply to 2.33 times.
• The refinancing extends debt maturities beyond five years and is expected to lower annual interest costs materially. The combination of operating growth and balance-sheet improvement is particularly helpful. Cost cutting alone can improve short-term profits, but customer and revenue growth provide a stronger foundation if they can be sustained.

What should investors watch?

The main issue remains the size of the debt burden. Net debt of €3.2 billion is lower than a year earlier but is still substantial, making continued cash generation and disciplined spending important.

Investors should also keep an eye on whether EBITDAaL and operating cash flow begin to grow more quickly. Revenue rose 2% and EBITDAaL increased 3%, but operating cash flow moved from €201 million to €204 million. The announcement did not disclose guidance for the full year. It also provided no detailed figures for capital expenditure, free cash flow, customer churn, average customer spending or net profit. That limits the conclusions that can be drawn from one quarter.

Finally, the financial information is unaudited and was presented partly to satisfy Zegona's external debt-reporting obligations.

The investor takeaway

Zegona's first-quarter performance shows further progress at Vodafone Spain. Revenue, customer numbers and operating earnings all increased, while debt and leverage moved lower.

The refinancing could prove especially valuable. Reducing the annualised run-rate interest cost from €230 million at March 2026 to approximately €170 million would strengthen cash generation, although the final saving remains sensitive to Euribor. Overall, this is a solid update rather than a dramatic acceleration. The key question for future quarters is whether Zegona can maintain customer and revenue growth while converting more of its operating performance into cash and continuing to reduce its still-significant debt burden.