Emirates Telecommunications Group has acquired a 9.8% stake in Vodafone for around $4.4 billion as it begins its latest expansion into international markets.
The state-controlled UAE group, formerly known as Etisalat and now renamed e&, said on Saturday the investment allowed it to “gain significant exposure to a global leader in connectivity and digital services.” e& said the transaction provided a “compelling and attractive valuation.”
The Abu Dhabi-listed group said it planned to be a long-term shareholder in Vodafone and supported 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 businesses, exploring opportunities in the rapidly developing global telecommunications market and supporting the adoption of next generation technologies,” said Hatem Dowidar, director the executive said in a statement.
Vodafone acknowledged the investment and said it hoped to build a long-term relationship with Etisalat.
Vodafone has been under pressure since it emerged that Cevian Capital, Europe’s largest activist investor, had created an unspecified stake and was seeking a review of what its investors believe is an overly complex business model.
Investors in Cevian have called on the company to divest underperforming parts of the business and make significant progress towards mergers or acquisitions in markets where chief executive Nick Read has said it is looking to do business, namely , the United Kingdom, Italy and Spain.
The Financial Times reported earlier this week that Vodafone was in conversations to combine its UK operations with domestic rival Three UK, the mobile operator owned by Hong Kong infrastructure conglomerate CK Hutchison.
Karen Egan, an analyst at Enders Analysis, said e&’s stake amounted to “another shareholder adding to the pressure on Read. . . at a crucial moment for him.”
“A company like that doesn’t take a sizeable minority position unless they think they can have a lot of influence and I don’t think they would buy a company like Vodafone unless they thought the momentum was about to change significantly.” she added.
Vodafone will publish its full-year 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% on the year, with a 3% increase in the aggregate subscriber base 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 in a push to prepare for a post-oil future through national diversification and expansion into global markets through ventures. national leaders, such as e&.
The group, which has already established an international presence in the Middle East, Africa and South Asia, has restructured its operations in a bid to further diversify internationally and expand its offering in fintech and other services.
The telecommunications business spans 16 countries, led by its base of operations, as well as Saudi Arabia, Pakistan and Egypt. The group has divided fintech and digital entertainment services into “e&life”, cyber security and artificial intelligence solutions into “e&enterprise”, while “e&capital” will focus on mergers and acquisitions and increasing its international presence.
The group was formed in 1976, five years after the United Arab Emirates gained its independence, maintaining monopoly status until 2007, when another state-controlled telecommunications company, Du, began operations. Virgin Mobile launched in 2017 in partnership with You.
It remains the dominant player in the United Arab Emirates market, which has yet to be opened to full competition and blocks most internet-based phone calls.