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E& snaps up 9.8% stake in Vodafone

Vodafone woke up on Monday with a new major shareholder after United Arab Emirates-based operator E& acquired a 9.8% stake in the UK-based group for $4.4 billion.

E&, formerly known as Emirates Telecommunications Group (Etisalat), said it had made the investment to gain "significant exposure to a world leader in connectivity and digital services."

In its stock market announcement, E& made clear that it has "no intention" to make an offer for the whole of Vodafone. Indeed, the UAE operator insisted that it is "fully supportive" of Vodafone's board and existing management team, does not seek board representation and "plans to be a long-term and supportive shareholder in Vodafone."

Vodafone has acknowledged the move, stating merely that "we look forward to building a long-term relationship with Etisalat." It's worth noting that the UK group currently has a partner market agreement with Du, E&'s rival operator in the UAE.

The move appears to form part of E&'s ambitions to be a "global player in telecom and technology" and to increase its exposure to international markets.

E&'s current CEO is Hatem Dowidar, who also knows Vodafone well. He spent 16 years at the group from 1999 to 2015, working in roles both in the UK and at Vodafone Egypt.

Dowidar said the investment is regarded 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."

Friend or foe?

Reactions to E&'s raid on Vodafone shares have been somewhat variable. Some reports suggest CEO Nick Read has gained an ally that supports his business strategy, while others see him being pestered by another major shareholder that wants to see big changes at the group.

Indeed, Vodafone has been under pressure since it emerged that activist shareholder Cevian Capital had built up an unspecified stake in the group. Cevian has been calling on the operator to overhaul its portfolio and business model.


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Read is already considering mergers or acquisitions in the UK, Italy and Spain. Last week, Vodafone reportedly entered into talks to merge its UK operations with rival 3 UK.

Various global infrastructure funds have also reportedly approached Vodafone about acquiring a majority stake in Vantage Towers, the company's European tower spinout.

Kester Mann, an analyst at CCS Insight, suggested that the "surprise move" from E& could bring temporary relief to Read amid mounting influence from Cevian.

"Indeed, the presence of a new, wealthy shareholder could offer welcome financial support for Vodafone's fixed and mobile investments across its broad footprint. It could also bolster efforts to secure deals in competitive European markets such as the UK, Italy, Spain and Portugal, something Cevian is increasingly pushing for," Mann said.

Mann noted that E& has said it does not intend to make an offer for Vodafone, "and recently tightened UK takeover rules could jeopardize any plans to do so."

"However, Vodafone will still want to carefully monitor the long-term intentions of its unexpected new backer," he cautioned.

As for E&, the investment in Vodafone reflects an ambition set out earlier in 2022 to explore new avenues of growth, expand offerings and forge new partnerships, Mann observed.

"In particular, it is seeking to bolster its credentials in helping enterprises in their digital transformation journey. Few people expected this guidance to lead to an equity stake in one of the industry's biggest global providers just a few months later; analysts will be monitoring its progress with interest," he said.

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— Anne Morris, contributing editor, special to Light Reading

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