Vodafone Group gave a 9.8% stake to Emirates Telecommunications Group for $4.4bn over the weekend which sent Vodafone shares to rise 1.6% to 119.7p on Monday.
Emirates Telecommunications Group’S subsidiary Atlas 2022 Holdings bought 2.8bn Vodafone shares for around $4.4bn while praising both the brand and the quality of its business.
Vodafone Group appealed to e&, formerly known as Etisalat, as it was on the search for a company with significant exposure in new markets to where e& aims to expand.
The purchase of Vodafone Group’s stake makes Emirates Telecom the largest single stakeholder of the UK telecommunication group. However, e& did say it has no intention of making an offer for the takeover of Vodafone.
The telecom sector was compared to be “as dull as dishwater” according to Russ Mould, Investment Director, AJ Bell, as there was no excitement.
However, Vodafone made moves such as disposing portions of its assets known as Vantage Towers, Euskaltel which was acquired by Masmovil which raised investor enthusiasm.
Not too soon before e&’s purchase, Cevian Capital took a large portion of Vodafone in the attempt to raise shareholder return through selling parts of its operations and consolidating its position in key markets according to Mould.
Mould also added, “Furthermore, there has been chatter that Vodafone was in talks to merge its UK operations with competitor Three UK.”
He notes that due to cheap valuations for telecom shares, investors find it a “logical place” to “plant flags” and “enforce change.”
Vodafone
Vodafone was almost saturated in mature markets due to regulations and pressure from competition driving its prices down.
Nick Read, Chief Executive Officer of the Vodafone Group has been struggling to simplify the group’s portfolio to support higher returns for its shareholders. Since Nick Read signed on in 2018, the shares have fallen 20% and the group’s net debt has reached $46.1bn.
Vodafone is welcoming e& with open arms as the group said its long-term strategic plans “continue to make good progress.” E& stated its full support of the company’s current business strategy and its board and existing management team.
E& mentioned that it “does not seek board representation” and instils confidence in Vodafone to “unlock value from its organic business activity and other potential strategic transactions.”
Hatem Dowidar, CEO of Etisalat, said, “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”.
