UPDATE PROPOSAL TO INCREASE INVESTM'T IN EUSKALTEL

NOT FOR DISTRIBUTION, PUBLICATION OR RELEASE, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN OR INTO OR FROM THE UNITED STATES OR TO ANY US PERSON, CANADA, AUSTRALIA, JAPAN, THE REPUBLIC OF SOUTH AFRICA, THE EEA OR TO ANY PERSON LOCATED OR RESIDENT IN AN EEA STATE OTHER THAN THE UK, BELGIUM, THE NETHERLANDS, ITALY, IRELAND AND SPAIN, OR ANY OTHER JURISDICTION IN WHICH THE DISTRIBUTION, PUBLICATION OR RELEASE WOULD BE UNLAWFUL.

This announcement is an advertisement and does not constitute a prospectus in connection with an offering of securities of the Company.  Investors must neither accept any offer for, nor acquire, any securities to which this document refers, unless they do so on the basis of the information contained in the applicable prospectus to be published by the Company.  The subscription or purchase of ordinary shares of the Company is subject to specific legal or regulatory restrictions in certain jurisdictions.  Persons distributing this communication must satisfy themselves that it is lawful to do so.  The Company assumes no responsibility in the event there is a violation by any person of such restrictions.

ZEGONA COMMUNICATIONS PLC

21 December 2018 

UPDATE ON ZEGONA'S PROPOSAL TO INCREASE ITS INVESTMENT IN EUSKALTEL

On 19 October 2018, Zegona Communications plc ("Zegona") announced its intention to make a partial tender offer to acquire up to a maximum of 14.9% of the outstanding share capital of Euskaltel, S.A. ("Euskaltel") at a price of €7.75 per share (the "Tender Offer").

In recent weeks, Zegona has continued the process to secure funding for its proposed Tender Offer. However, given the deterioration in equity market conditions during this period, the terms available for the transaction to acquire the full 14.9% of Euskaltel would not have been acceptable to Zegona shareholders. Zegona therefore no longer intends to proceed with its proposed Tender Offer.

Zegona has agreed terms for a shareholder relationship with Talomon Capital Limited ("Talomon"), which is a shareholder of both Zegona and Euskaltel¹. This increases Zegona's confidence in its ability to engage positively with Euskaltel with materially increased influence. Under the shareholder relationship agreement, Talomon would have an ownership entitlement of up to 2.4% of Euskaltel.  Therefore, given Zegona's existing 15% ownership of Euskaltel, in order to avoid potentially triggering a mandatory offer, Zegona believes it will be limited to acquiring a maximum of an additional 12.5% of Euskaltel.

Zegona's strategy in relation to Euskaltel remains focussed on increasing its ownership position and using its increased influence to work constructively with the Euskaltel board of directors and management to improve the performance of the business. Zegona will therefore seek to increase its ownership of Euskaltel through market purchases at a price it considers attractive for its shareholders based on prevailing market conditions.

Following good support from existing and new investors, Zegona intends to raise new equity for these proposed market purchases via a non pre-emptive institutional placing. In addition, Zegona has been offered flexible loan financing facilities², subject to certain conditions, that could be used to increase Zegona's investment in Euskaltel. Zegona intends to publish a circular and prospectus for its equity placing in January 2019.

¹ Talomon owns between 1% and 2% of Euskaltel's share capital on behalf of its clients and funds it manages

² Financing facilities in an aggregate amount of £30 million, with up to £10 million available from the Virgin Group

Enquiries

Tavistock (Public Relations adviser - UK)
Tel: +44 (0)20 7920 3150
Jos Simson - jos.simson@tavistock.co.uk
Lulu Bridges - lulu.bridges@tavistock.co.uk 

Llorente y Cuenca (Public Relations adviser - Spain)
Tel: +34 (0) 91 563 7722
Jorge López-Zafra - jlopez@llorenteycuenca.com 

This announcement contains inside information.

LEI: 213800ASI1VZL2ED4S65

Important Notice

This announcement has been prepared in accordance with English law, the Listing Rules and the Disclosure Guidance and Transparency Rules and information disclosed may not be the same as that which would have been prepared in accordance with the laws of jurisdictions outside England.

The distribution of this announcement in jurisdictions outside the United Kingdom may be restricted by law and therefore persons into whose possession this announcement comes should inform themselves about, and observe such restrictions. Any failure to comply with the restrictions may constitute a violation of the securities law of any such jurisdiction.

This announcement is not for release, publication, distribution, directly or indirectly, in or into the United States (including its territories and possessions and any state or other jurisdiction of the United States) or to any US person. This announcement does not constitute or form a part of any offer to sell or solicitation to purchase or subscribe for securities in the United States or in any other jurisdictions. The securities referred to in this announcement have not been, and will not be, registered under the United States Securities Act of 1933, as amended (the "US Securities Act") or the securities laws of any state of the United States or with any securities regulatory authority of any state or other jurisdiction of the United States or any state securities laws of the United States and may be offered and sold (a) in the United States, and to US persons outside the United States, only to persons who are both "qualified institutional buyers" (as defined in Rule 144A under the US Securities Act) and "qualified purchasers" (as defined in Section 2(a)(51) of the US Investment Company Act of 1940, as amended (the "US Investment Company Act"), in transactions exempted from, or not subject to, the registration requirements of the US Securities Act, and (b) outside the United States only to non-US persons in "offshore transactions" as defined in, and in reliance on, Regulation S under the US Securities Act. The Company has not intended and does not intend to make any public offer of securities in the United States. No registration has been or will be made under the US Investment Company Act. 

CAUTIONARY NOTE REGARDING FORWARD-LOOKING INFORMATION

This announcement includes statements that are, or may be deemed to be, "forward-looking statements".  These forward-looking statements can be identified by the use of forward-looking terminology, including the terms "believes", "estimates", "envisages", "plans", "anticipates", "targets", "aims", "continues", "expects", "intends", "hopes", "may", "will", "would", "could" or "should" or, in each case, their negative or other variations or comparable terminology.  These forward-looking statements include matters that are not facts. By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances.  A number of factors could cause actual results and developments to differ materially from those expressed or implied by the forward-looking statements., including, without limitation: Euskaltel's failure to work with Zegona to improve the performance of the business, changing demands of consumers of telecommunications services, the increasing adoption of free-to-home and direct-to-home television services, changing business or other telecommunications market conditions, and general economic conditions.  These and other factors could adversely affect the outcome and financial effects of the plans and events described in this announcement. Forward-looking statements contained in this announcement based on past trends or activities should not be taken as a representation that such trends or activities will continue in the future.  Subject to any requirement under the Listing Rules, the Prospectus Rules, the Disclosure Guidance and Transparency Rules or other applicable legislation or regulation, Zegona does not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.  Investors should not place undue reliance on forward-looking statements, which speak only as of the date of this announcement.

The person responsible for arranging for the release of this announcement on behalf of Zegona is Dean Checkley, whose business address is 20 Buckingham Street, London WC2N 6EF.