UAE-Based Emirates Telecom Acquires 9.8 Per Cent Stake In Vodafone For $4.4 Billion

E& said it had made the investment to gain significant exposure to a world leader in connectivity and digital services, however, the telco had no intention of making an offer for the whole of Vodafone

UK-based Vodafone's net debt has reached 44.3 billion euros. Image: Getty

Source : Getty

New Delhi: Etisalat, United Arab Emirates (UAE)-based telecoms firm, has acquired a 9.8 per cent stake in Vodafone for $4.4 billion, according to a report by Reuters.

The UAE-based telco was saying a day before that it was planning for expansion into newer markets and related areas such as financial technology.

According to the report, E&, formerly known as Emirates Telecommunications Group, said it had made the investment to gain significant exposure to a world leader in connectivity and digital services. However, the company said that it had no intention of making an offer for the whole of Vodafone.

Like several other mobile companies, Vodafone has also been struggling in its more mature markets where competition and regulation have pushed prices lower. The UK-based telecom major’s net debt has reached 44.3 billion euros ($46.1 billion).

Chief Executive Officer Nick Read is under pressure to simplify its portfolio and improve returns after a more than 20 per cent slide in its share price since he took over in 2018.

According to Vodafone, it is looking forward to building a long-term relationship with e&.

“We continue to make good progress with our long-term strategic plans and will provide an update in our FY22 results announcement on 17 May,” it said in a statement.

E& said it is fully supportive of the company's current business strategy and its board and existing management team.

“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 CEO Hatem Dowidar.

Recently, Etisalat separated its business into e& life and shifted focus on consumer services, e& enterprise, providing digital services to government and business, and telecoms arm Etisalat, which its CEO said is the world’s seventh-largest by market capitalisation.

"We are positive on the investment for e& - it enables an improved capital structure, supports EPS (earnings per share) growth, (and) arrives at attractive valuation multiples," said Ziad Itani, executive director equity research at Arqaam Capital.

While the investment is sizable, it is less than 6 per cent of the market capitalisation of e&, which also has a healthy balance sheet with net debt/Ebitda at 0.41 times, he said.