Abu Dhabi, UAEThursday 24 September 2020

STC and Vodafone agreement for $2.4bn Egypt stake sale lapses without a deal

The two parties have agreed to continue negotiations for the sale of Vodafone's majority stake in Vodafone Egypt

STC and Vodafone Group have agreed to continue discussions for Vodafone Egypt stake sale. Waseem Obaidi for The National 
STC and Vodafone Group have agreed to continue discussions for Vodafone Egypt stake sale. Waseem Obaidi for The National 

Saudi Telecom Company, the biggest telecommunications operator in the country by market value, said it could not reach an agreement on a $2.4 billion (Dh8.8bn) deal to buy a 55 per cent stake in Vodafone Egypt within the agreed timeframe.

However, the company agreed to continue discussions with the UK-based mobile carrier Vodafone Group for its stake in the Egyptian telecoms firm, it said in a statement to the kingdom's Tadawul exchange, where its shares trade.

STC said the extension period of the preliminary agreement has ended without reaching an agreement to conclude the transaction due to “misalignment with relevant parties”.

“An understanding has been reached between STC and Vodafone Group to keep the dialogue open”, the statement said.

Vodafone Group said it is looking to “finalise the transaction in the near future”. It “now looks to Saudi Telecom and Telecom Egypt to find a suitable agreement to enable the transaction to close”, Bloomberg cited a separate Vodafone Group statement as saying on Sunday.

In January, STC offered to buy a majority stake in Vodafone's Egyptian unit as part of its regional expansion. It signed a non-binding agreement and extended it in April, citing pandemic-related logistical challenges. The agreement was extended again in July, as “the parties need more time to complete the processes related to the transaction, including the due diligence”.

If a deal were to be agreed, a majority stake in Vodafone Egypt will give STC a foothold in the Arab world's most populous country, as it looks to expand its operation in the region and beyond. Egypt is one of the largest telecoms markets in North Africa, making it a prime target for operators looking to enter high-growth territories.

With 44 million subscribers and a 40 per cent market share, Vodafone Egypt is the North African country's biggest mobile operator. State-run Telecom Egypt holds the remaining 45 per cent stake of the operator.

STC, which is majority owned by Saudi Arabia’s sovereign wealth fund, the Public Investment Fund, mounted an unsuccessful bid in 2013 to acquire a 45 per cent stake in Telecom Egypt. However, analysts said earlier this year that Egypt's state-owned operator could be more willing to sell its stake in Vodafone Egypt after launching its own mobile network, known as ‘We’, in 2017.

In February, Egypt’s Financial Regulatory Authority said STC should make an offer to acquire Telecom Egypt’s remaining stake in Vodafone Egypt if its deal with Vodafone goes through. The regulator cited a 1992 law that would oblige STC to bid for the outstanding shares if a deal materialises.

Updated: September 13, 2020 01:00 PM

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