e&, a telecommunications business located in the United Arab Emirates, has purchased a 9.8% stake in Vodafone for $4.4 billion only days after announcing plans to grow into new countries and related industries such as financial technology.
e&, formerly known as Emirates Telecommunications Group, stated that it invested to obtain “substantial exposure to a world leader in connectivity and digital services” but had no intention of launching an all-cash purchase for Vodafone.
Like other mobile providers, Vodafone has struggled in mature regions where competition and regulation have driven down pricing.
The group’s net debt has reached 44.3 billion euros ($46.1 billion). CEO Nick Read is under pressure to streamline its business; increase returns following a more than 20% drop in its share price since he took over in 2018.
Vodafone stated that it is looking forward to establishing a long-term collaboration with e&. “We continue to make significant progress with our long-term strategic initiatives,” the company stated. “We will offer an update in our FY22 results announcement on 17 May.”
e& said that it fully supports the company’s current business plan and its board of directors and current management team.
“We regard this initiative as a wonderful opportunity for e& and its shareholders since it will allow us to strengthen and extend our international portfolio, which is in line with our strategic vision,” CEO Hatem Dowidar said.
The UAE corporation recently divided its operations into e& life, which focuses on consumer services, e& enterprise, which provides digital services to government and industry, and Etisalat, the world’s seventh-largest by market capitalization, according to its CEO.
“We are optimistic on the e& investment since it provides an enhanced capital structure, promotes EPS (earnings per share) growth, and comes at favorable valuation multiples,” said Ziad Itani, executive director of equities research Arqaam Capital.
While the investment is significant, it is less than 6% of the market e& capitalization, which also has a good balance sheet with a net debt/EBITDA ratio of 0.41 times, according to him.
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