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Saudi Telecom (STC) has signed a memorandum to buy Vodafone’s 55% stake in Vodafone Egypt, but the regulator says they must offer to buy Telecom Egypt’s 45% share too
A memorandum was signed at the end of last month for Vodafone to sell its 45% stake in Vodafone Egypt to STC, a company looking to make its first foothold beyond the Gulf. The deal was for just under $2.4 billion.
But yesterday Egypt’s Financial Regulatory Authority (FRA) noted that this purchase was subject to a 1992 law that requires a mandatory tender for any outstanding shares in the company. Thus, if STC wants a share of Vodafone Egypt, it will have to offer to buy all of it.
According to analysts, this development is not likely to throw a spanner in the works for STC, who have the financial stability to absorb the additional costs if necessary.
Meanwhile, while Telecom Egypt initially indicated that it had no intention of selling its 45% stake in Vodafone Egypt, it did note that it was “closely following” the STC–Vodafone deal’s proceedings “to consider all of its possible investment options and opportunities”.
Indeed, the sale of at least part of its shares could be a tempting proposal for the majority state-owned Telecom Egypt, who would use the cash injection to offset the ~$950 million debt it incurred following the launch of its mobile network, We.
On the other hand, Vodafone Egypt is currently the most profitable operator in the country, with a 40% market share and 44 million subscribers. To remove themselves from such a profitable enterprise could also be costly.
If STC do indeed want to go ahead with this deal in light of this requirement, Telecom Egypt will be faced with a quandary familiar to all operators: short-term gains versus long-term investment.
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