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Vodafone finds a welcome friend in 9.8% shareholder Etisalat

Hatem Dowidar Etisalat.jpg

Etisalat – now called e& – took a surprise 9.8% stake in Vodafone at the weekend, for US$4.4 billion.

Vodafone welcomed the investment, especially as e& said it supported Voda’s strategy and said it did not intend to make a takeover bid.

Vodafone said: “We look forward to building a long-term relationship with Etisalat.” The UK-based group announces its full-year results tomorrow, when it will provide an update on “good progress with our long-term strategic plans”.

Karim Bennis, group CFO of e&/Etisalat, whose official name is Emirates Telecommunications Group, said: “e& is fully supportive of Vodafone’s board and existing management team and its current business strategy announced in November 2021.”

It “does not seek board representation and is confident about the company’s ability to unlock value from its organic business activity and other potential strategic transactions”. It “plans to be a long-term and supportive shareholder in Vodafone and is not seeking to exert control or influence the company’s board or management team”.

Group CEO Hatem Dowidar said: “Vodafone is one of the leading businesses at the heart of digital communications in Europe and Africa with a compelling business offering critical connectivity and digital services.”

PP Foresight analyst Paolo Pescatore said: “Despite Vodafone’s failed attempts to consolidate in key markets, this is a strong endorsement of its strategy and most significantly the board. The move itself will raise eyebrows and may lead to some tension with other shareholders who are keen to see Vodafone consolidate in key markets.”

Kester Mann, an analyst with CCS Insight, specialising in consumer and connectivity, noted the potential implications on activity by Cevian Capital, which was reported earlier this year to have taken a stake in Vodafone.

“The surprise move from e& could bring temporary relief to under-pressure CEO Nick Read amid mounting influence from activist shareholder Cevian Capital,” said Mann.

“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.”

In the UK Vodafone acknowledged reports last week that it was in conversation with CK Hutchison’s Three about a possible merger, that would reduce the UK mobile market from four to three.

Mann noted: “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. … 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.”

Dowidar from Etisalat seemed to confirm that by saying: “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.”

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