The telecommunications company e & (ETISALAT.AD) from the United Arab Emirates bought a 9.8% stake in Vodafone (VOD.L) for $ 4.4 billion a few days after it said it was looking to enter new markets and related them areas such as financial technology.
E&A, formerly known as the Emirates Telecommunications Group, said it had made the investment to gain “significant familiarity with the world leader in communications and digital services”, adding that it did not intend to make an offer for all of Vodafone.
Vodafone, like other mobile operators, is experiencing difficulties in its more mature markets, where competition and regulation have pushed prices down.
The group’s net debt reached 44.3 billion euros ($ 46.1 billion), and CEO Nick Reed is under pressure to simplify his portfolio and improve returns after the stock price fell more than 20% after he took office in 2018.
Vodafone said it looks forward to building a long-term relationship with e &. “We continue to make good progress with our long-term strategic plans and will provide updated information in our announcement of the results of fiscal year 22 on May 17,” the statement said.
E&A said it fully supports the company’s current business strategy, 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 increase and develop our international portfolio in line with our strategic ambitions,” said CEO Hatem Dovidar.
The UAE-based company recently split its business into e & life, focusing on consumer services, e & enterprise, providing digital services to government and business, and the telecommunications division Etisalat, which, according to the CEO, is the world’s seventh in terms of market capitalization.
“We are positive about investing in e & – it improves capital structure, supports EPS growth (earnings per share), (and) achieves attractive valuation ratios,” said Ziad Itani, executive director of capital research at Arqaam Capital.
While investments are significant, they account for less than 6% of e & market capitalization, which also has a healthy balance with net debt / EBITDA of 0.41 times, he said.