HomeMiddle East & AfricaShock share swoop on Vodafone by Etisalat

    Shock share swoop on Vodafone by Etisalat


    UAE-based telco group takes a tenth of UK’s no 3 operator

    Emirates Telecommunications Group (Etisalat now known as e&) has bought a 9.8% stake in Vodafone for €4.22 billion (£3.6bn). They plan to consolidate their efforts by cutting waste and jointly launching new products and services, according to Etisalat Group CEO Hatem Dowidar, a former Vodafone chief of staff in London.

    “It’s a unique opportunity to acquire a significant stake in one of the leading and strongest global telecom brands, and a company that we know well,” said Dowidar. The state-controlled United Arab Emirates (UAE)-based firm is known to be seeking new markets, including Africa and Europe. Buying Vodafone is not part of its plan but Dowidar said he was looking forward to “building a mutually beneficial strategic partnership” and supporting the board.

    Shock share swoop

    This heaps more pressure on Vodafone chief Nick Read to expedite his plan for market consolidation, according to telecoms analyst Paolo Pescatore at PP Foresight. “The move may lead to tension with other shareholders who are keen to see Vodafone Vodafone to work more consolidate in key markets,” Pescatore told Leah Montebello at CityAM.

    Last week it was reported that Vodafone is continuing merger talks with rival Three. The union of the UK’s third and fourth biggest players has been dogged by a failure to reach an agreement. The UK’ s competition regulation and in the UK presenting significant hurdles for the companies. Three UK chief Robert Finnegan is reportedly keen for market consolidation after its last disappointing financial statement on revenue growth, despite hitting its strongest services contract deals since 2012.

    Dilemma for merger

    Karen Egan at Enders Analysis Karen Egan said scale is crucial for mobile operators and described the potential mergees as “‘sub-scalers” who are finding life increasingly difficult. Read, formerly Vodafone’s chief financial officer, has argued for consolidation in the telecoms industry and says UK firms would attract more investment if their combined efforts made them more profitable.

    Read is under even more pressure to overhaul Vodafone activist investor Cevian Capital made its presence felt in the boardroom after acquiring a stake in the firm.

    However, Vodafone rejected an approach from Italy’s Iliad and private equity Apax Partners. Though Read is driving for deals and Cevian is shouting directions from the passenger seat, The Vodafone CEO has insisted that he is resisting temptation to seek any port in the storm. “The deal has to be right,” Read said.