Saudi Telecom agrees to buy Vodafone Egypt stake for $2.4bn
The non-binding agreement is valid for 75 days from Wednesday and can be extended by mutual consent
Saudi Telecom Company, the biggest telecommunications operator in the kingdom by market value, agreed to buy Vodafone's 55 per cent stake in its Egyptian unit for $2.4 billion (Dh8.8bn).
The “non-binding agreement” with Vodafone is “effective for a period of 75 days from the date of its signature," and can be extended with the mutual consent of both parties, STC said in a statement to Saudi Arabia’s Tadawul stock exchange, where its shares trade.
Vodafone Egypt is the North African country's largest mobile operator in terms of active subscribers. State-run Telecom Egypt holds remaining 45 per cent stake of the operator. The agreement with STC values Vodafone Egypt at $4.4bn.
STC is majority-owned by the kingdom's Public Investment Fund, which holds a 70 per cent stake in the firm. The telco’s share price rose 0.9 per cent following the agreement.
“The potential acquisition of Vodafone Egypt is in line with our expansion strategy,” Nasser Al Nasser, chief executive of STC, said in a statement.
The transaction, which is still subject to a “detailed due diligence”, confirms STC's eagerness to maintain a leadership position not only in the kingdom, but also in the wider region, said Mr Nasser, adding, “Vodafone Egypt is the leading player in the Egyptian mobile market and we look forward to contribute further to its continuous success."
“A binding agreement is subject to approvals by STC, Vodafone and regulators... no other parties were involved in the potential deal,” it added.
Industry analysts consider the agreement a firm step by STC towards expanding its regional footprint.
“Strategically speaking, Egypt is a key market in the MENA region which is still growing and overall macros are improving,” Nishit Lakhotia, head of research at Bahrain-based investment bank Sico, told The National.
STC’s current $49.1bn market capitalisation makes it the largest telecoms company in the region. Headquartered in Riyadh, it employs almost 13,500 staff in Saudi Arabia and nearly 19,000 across the STC Group.
Vodafone said the transaction is “consistent” with the company’s efforts to “simplify the group to two differentiated, scaled geographic regions - Europe and sub-Saharan Africa”.
"I am deeply proud of our business in Egypt, being the clear number one leader in the market. Under STC, I believe they will continue to flourish,” said Nick Read, chief executive of Vodafone Group, in a statement. “It will reduce our net debt and unlock value for our shareholders.”
In 2013, STC unsuccessfully tried to acquire a 45 per cent stake of Telecom Egypt.
STC reported a 22 per cent drop in fourth-quarter net profit due to lower operating profits and a rise in expenses. Net profit for the three months to December 31 fell to Dh2.36bn.
Profit was impacted as operating expenses rose due to continued investments in 5G network infrastructure, the operator's fibre optics network and large investments in software and systems related to cloud computing services, managed services and cyber security, the company said earlier.
Updated: January 29, 2020 02:40 PM