Sunday, 03 July 2022

e& buys $4.4bn stake in Vodafone

by Harry Baldock, Total Telecom
Monday 16 May 22

The operator group formerly known as Etisalat has acquired a 9.8% stake in the business, but say they have no intentions of attemtping a takeover

Today, e&, formally Etisalat, has announced it has invested $4.4 billion into Vodafone, taking a 9.8% stake in the business.  Etisalat rebranded as e& back in February, splitting its operations into various arms, including e& Life (consumer services), e& Enterprise (enterprise services), and e& Capital (investment). At the time, the company said the move would allow the company increased agility to capitalise on emerging opportunities and allow it to expand into new markets more quickly…

Today, e&, formally Etisalat, has announced it has invested $4.4 billion into Vodafone, taking a 9.8% stake in the business. 

Etisalat rebranded as e& back in February, splitting its operations into various arms, including e& Life (consumer services), e& Enterprise (enterprise services), and e& Capital (investment). At the time, the company said the move would allow the company increased agility to capitalise on emerging opportunities and allow it to expand into new markets more quickly. 

Now, with the stake in Vodafone, it seems the company is ready to make good on this plan, with e& saying in a statement that it had made the investment “to gain significant exposure to a world leader in connectivity and digital services”.

"We see this investment as a good opportunity for e& and its shareholders as it will allow us to enhance and develop our international portfolio, in line with our strategic ambition," said e& CEO Hatem Dowidar.

Naturally, such an investment has triggered speculation around whether e& intends to use this investment as a springboard from which to launch a takeover offer, mirroring concerns around billionaire Patrick Drahi’s new minority stake in BT last year. However, e& say they have no intention of pursuing a takeover and were instead looking to be a long-term shareholder in the business.

In fact, the company has expressed its support of the existing Vodafone board of directors; perhaps unsurprising, since Dowidar has previously worked for Vodafone for 17 years, including alongside Vodafone CEO Nick Read.

“We are looking forward to building a mutually beneficial strategic partnership with Vodafone with the goal of driving value creation for both our businesses, exploring opportunities in the rapidly developing global telecom market and supporting the adoption of next-generation technologies,” said Dowidar.

Takeover fears aside, this investment could be very timely for Vodafone. As a Group, the telco has been struggling under the weight of roughly €44 billion of debt, with strict regulations and highly competitive markets leaving their finances relatively flat for a number of years. As a result, the company has been under increasing pressure to make significant strategic changes in recent months, perhaps including to its leadership team.

The need for change was perhaps made most clear at the start of the year, when activist investor Cevian Capital took an undisclosed stake in the business and called for leadership changes and a simplification of the company’s portfolio. 

Vodafone CEO Nick Read has long been calling for greater consolidation in Vodafone’s various markets, including in Italy, Spain, Portugal, and the UK. In fact, just last week Vodafone were once again tied to rumours of a potential merger with Three in the UK. 

So far, however, progress towards tie-ups in most of Vodafone’s markets have not been forthcoming.

As a result, it seems that this investment could be something of a double-edged sword for Vodafone. On the one hand, it provides them with a much-needed cash injection at a time when the operators share price has continued to slide; on the other, it presents them with yet another investor looking to have its say in driving the company’s strategy at a time when its leadership appears vulnerable. 


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