UAE telecommunications group takes 9.8% stake in Vodafone

Emirates Telecommunications Group has acquired a 9.8% stake in Vodafone for around $4.4 billion as it launches its latest expansion into international markets.

The state-controlled Emirati group, formerly known as Etisalat and now rebranded as e&, said on Saturday the investment had enabled it to “gain significant exposure to a global leader in connectivity and digital services. “. e& said the transaction offered a “compelling and attractive valuation”.

The Abu Dhabi-listed group said it plans to be a long-term shareholder of Vodafone and supports Vodafone’s board. There were no plans to bid for the British multinational, he added.

“We look forward to building a mutually beneficial strategic partnership with Vodafone with the aim of driving value creation for both our businesses, exploring opportunities in the rapidly developing global telecommunications market and supporting the adoption of telecommunications technologies. next generation,” Hatem Dowidar, executive director, said in a statement.

Vodafone acknowledged the investment, saying it was looking forward to building a long-term relationship with Etisalat.

Vodafone has been under pressure since it emerged that Cevian Capital, Europe’s biggest activist investor, had made an unspecified stake and demanded an overhaul of what its investors say is an overly complex business model.

Cevian investors have called on the company to shed underperforming parts of the business and make meaningful progress toward mergers or acquisitions in the markets chief executive Nick Read said he was looking to do. agreements, namely the United Kingdom, Italy and Spain.

The Financial Times reported earlier this week that Vodafone was in talks to combine its UK operations with domestic rival Three UK, the mobile operator owned by Hong Kong infrastructure conglomerate CK Hutchison.

Karen Egan, analyst at Enders Analysis, said e&’s stake amounted to “another shareholder to add pressure on Read . . . at a crucial time for him”.

“A company like that doesn’t take a significant minority position unless it thinks it can have a lot of influence and I don’t think it would buy a company like Vodafone unless it thinks that the momentum was about to change quite dramatically,” she added.

Others saw the stock purchase as a positive indicator for the European telecommunications group and its management.

“Despite Vodafone’s failed attempts to consolidate in key markets, this is a strong endorsement of its strategy and especially of the board,” said Paolo Pescatore, analyst at PP Foresight.

Vodafone will release its annual financial results for 2021 on Tuesday.

According to Bloomberg, citing its own data, e& is now Vodafone’s largest shareholder, ahead of BlackRock, Vanguard Group and HSBC.

In 2021, e& reported a net profit of 9.3 billion dirhams ($2.5 billion), an increase of 3.2% year-on-year, with the total number of subscribers increasing by 3% to 159 million, including 12.7 million in the United Arab Emirates.

The United Arab Emirates, the second largest Arab economy thanks to large hydrocarbon reserves, is refocusing on a desire to prepare for a post-oil future via national diversification and expansion into global markets through national champion companies, such as e&.

The group, which has already established an international presence in the Middle East, Africa and South Asia, has restructured its operations with the aim of further diversifying internationally and expanding its offer in fintech and other services. ‘other services.

The telecoms business spans 16 countries, led by its home base, as well as Saudi Arabia, Pakistan and Egypt. The group has split digital entertainment and financial technology services into “e& life”, cybersecurity and artificial intelligence solutions into “e& enterprise”, while “e& capital” will focus on mergers and acquisitions and the development of its international presence.

The group was formed in 1976, five years after the independence of the United Arab Emirates, maintaining its monopoly status until 2007, when another state-controlled telecommunications company, Du, started operations. Virgin Mobile was launched in 2017 in partnership with Du.

It remains the dominant player in the UAE market, which has not yet been fully opened to competition and blocks most internet phone calls.

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