Etisalat Group has acquired a 9.8% stake in Vodafone for about $4.4 billion to kick-start its latest expansion into international markets.
The state-controlled UAE group, formerly known as Etisalat, now known as e&, said on Saturday that the investment allows it to “achieve significant opportunities for world leadership in connectivity and digital services”. e& said the deal offered a “compelling and attractive valuation”.
The Abu Dhabi-listed group said it plans to become a long-term shareholder of Vodafone and support Vodafone’s board. It added that there were no plans to make an offer to the British multinational.
“We look forward to a mutually beneficial strategic partnership with Vodafone, with the goal of driving value creation in both businesses, exploring opportunities in the fast-growing global telecommunications market, and supporting the adoption of next-generation technologies,” Hatem Dowidar Chief Executive Officer said in a statement. said in a statement.
Vodafone acknowledged the investment and said it looked forward to a long-term partnership with Etisalat.
Vodafone has been under pressure since Europe’s largest activist investor, Cevian Capital, took an unspecified stake and has been seeking to overhaul a business model its investors see as too complex.
Investors in Cevian have called on the company to shed underperforming parts of its business and make substantial progress on mergers and acquisitions in markets where Chief Executive Nick Read said he hoped to do deals in Britain, Italy and Spain.
The Financial Times reported earlier this week that Vodafone Negotiating a merger Its UK operations are in partnership with domestic rival Three UK, a mobile operator owned by Hong Kong-based infrastructure group CK Hutchison.
Karen Egan, an analyst at Enders Analysis, said e&’s stake amounted to “another shareholder increasing the pressure on Read . . . at a juncture for him”.
“Companies like that are not going to be in a sizable minority unless they think they can have a lot of impact, and I don’t think they’re going to buy a company like Vodafone unless they think there’s going to be a pretty big change in momentum,” she added.
Vodafone will release its full-year 2021 financial results on Tuesday.
According to Bloomberg, citing its own data, e& is now Vodafone’s largest shareholder, ahead of BlackRock, Vanguard and HSBC.
In 2021, e& reported a net profit of AED 9.3 billion ($2.5 billion), up 3.2% year-on-year, and its total subscribers rose 3% to 159 million, including 12.7 million in the UAE.
The UAE, the second largest Arab economy thanks to its vast hydrocarbon reserves, is refocusing on preparing for a post-oil future through domestic diversification and expansion into global markets through national leading companies such as e&.
The group has established an international footprint in the Middle East, Africa and South Asia and has restructured its operations to further diversify internationally and expand its product range into financial technology and other services.
Telecommunications operations span 16 countries, led by headquarters, as well as Saudi Arabia, Pakistan and Egypt. The group will split digital entertainment and fintech services into “e&life” and cybersecurity and artificial intelligence solutions into “e&enterprise”, while “e&capital” will focus on mergers and acquisitions and expanding its international presence.
Founded in 1976, five years after the UAE gained independence, the group maintained its monopoly until 2007, when another state-owned telecommunications company, Du, started operations. Virgin Mobile launched in partnership with Du in 2017.
It remains the dominant player in the UAE market and has yet to open up to full competition and block most internet-based calls.