More Industry Insightse& weighs 20% Vodafone stake, but keeps investment options open

August 4, 2023by myles0
  • e& testing the waters with regulatory and competition authorities in multiple countries on raised stake, with “no red flags” raised yet.
  • Further Vodafone buy not set in stone, and could be abandoned if better investment opportunity arises before the year is out.
  • Expansive operator confirmed it is to take control of PPF Telecom, and still in the running for a stake in Ethiopia’s Ethio Telecom.

UAE-based operator e& confirmed it is examining the prospect of increasing its stake in Vodafone from its current level of 14.6% to 20% before the end of the financial year.

Speaking to CNBC Arabia in an interview coinciding with the publication of e&’s results for the quarter and six months to end-June 2023 (Q1 FY23–24), Hatem Dowidar, e& Chief Executive, said taking a 20% stake was possible, and could generate annual procurement savings of $100m (€91m/£78m).

During the conference call for e&’s results, Dowidar further confirmed that the operator had written to the relevant authorities in multiple Vodafone markets to gauge the reaction to a potential increase in its stake in the Group and, to date, had seen “no red flags”.

The stake increase is not a foregone conclusion, however, with e& management emphasising that the share price has to be right. While naturally giving no clues as to what that price might be — “that’s the billion dollar question” said Dowidar — the CEO stressed any further stake-building would be considered alongside other investment options that may present themselves before the year is out.

“I’ve already got my objective out of the Vodafone investment by having a significant investment in a global player that is generating good dividends. So I will put in the money if the price is right and there is no other opportunity, for example for controlling consolidation. If there is such an opportunity, maybe even with a very nice [Vodafone] share price, I could still put it elsewhere.”


The decision on a potential buy is not expected to be made or implemented in the immediate future, but a decision is anticipated before the end of the year.

Vodafone and e& entered a strategic alliance in May 2023, which is expected to see closer collaboration in areas including procurement, innovation, and digital services provision in the multinational corporates market. As part of its Vodafone investment, e& has committed to not increasing its stake above 24.99% for the next two years, and not disposing of more than 3% of its shares in the next two twelve-month periods.

Due to its position as a shareholder, e& has a seat on the Vodafone board, which has been taken up by Dowidar. Should it increase its holding above 20% e& may be entitled to appoint another director to the Vodafone board.

Ethio still of interest, and e& has headroom for investment

e& is in a bullish mood, and Dowidar declared “our ambition is unlimited” as the operator pursues shareholder value. The operator reiterated on the results call that, while it would not bid for a greenfield mobile licence in the blossoming Ethiopian market, it does remain interested in taking a stake in the country’s mobile incumbent Ethio Telecom. Vodafone is backing Safaricom Ethiopia, the country’s first challenger to the state-controlled mobile business.

The group does, though, have a loose cap on its debt-driven spending, with a commitment in place to maintain a leverage ratio (net debt over EBITDA) below 1.5×. That ratio figure was at 0.58× at the end of FY21–22. This self-imposed limit could be revisited if an exceptional opportunity arose, but otherwise e& management appear content to stay within this boundary.

PPF telecoms deal wrapped up quickly

The potential of increasing its Vodafone holding comes as the Emirati operator takes a controlling stake in PPF Telecom, the telco arm of Czechia-based PPF Group.

In July, e& alerted the Abu Dhabi Securities Exchange (ADX) that it was in early stage talks with PPF regarding an investment. Yesterday, it confirmed that it has agreed to acquire just over 50% of both ServCo and InfraCo assets in PPF’s Bulgarian, Hungarian, Serbian, and Slovakian telco businesses.

In three of these markets it will be competing with Vodafone or a Vodafone channel partner. While Vodafone has an OpCo in Hungary, its associate A1 Telekom operates in Bulgaria and Serbia. Vodafone also has a Partner Markets alliance with Telekom Srbija in Serbia.

e& is to pay €2.15bn for the PPF Telecom stake, with up to €350m more due if undisclosed performance targets are met (but could receive a rebate on the price of up to €75m if they are not). There are also put and call options linked to the remaining PPF stake, which would be exercisable five years after the deal closing. Subject to regulatory approval, e& expects to complete the acquisition in the early months of 2024.

Source: Teleco Titans

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