Will the Saudis end up sitting in Telefónica? This was Etisalat’s move on Vodafone

He landing of the Saudi STC in Telefónica invites us to analyze similar strategies and takeovers of other Arab groups in the large European telecommunications companies. In recent years, its battered stock market history and significant capitalization drops have sponsored “unsolicited” inflows from shareholders with significant packages. This is the case of Altice at BT and Virgin and the French businessman Xavier Niel (owner of the Iliad operator) at Vodafone. But the big foray into focus is the “friendly approach” of the Abu Dhabi telecom giant Emirates Telecommunications (Etisalat) in the aforementioned British multinational, where it already controls 14.6% of the capital and could increase its presence to 20% or 25%. The parallels between that Saudi landing and the one now taking place in Telefónica are, without a doubt, surprising.

Etisalat’s entry into Vodafone began in May 2022 when the Emirati multinational, listed on the Abu Dhabi Stock Exchange, revealed a 9.8% stake after investing almost 4,230 million euros in the British operator. The same percentage acquired by STC Group, which has purchased 9.9% of Telefónica, becoming its largest shareholder.

Shortly after, the Saudi group rose to 11% encouraging speculation about a possible takeover. The Arab firm consolidated itself as the largest shareholder, ahead of BlackRock, Vanguard and HSBC, at vulnerable and especially low hours. In the midst of a confrontation between Vodafone and Cevian Capital AB and involved in a serious crisis that generated the resignation of its CEO, Nick Read, due to the poor results and the burden of its evolution on the stock market, where it has fallen nearly 55% in the last five years. The operator’s difficulties led to Read’s departure and, after months of interim, the board ratified Margherita Della Valle as the new CEO. Back then, Vodafone was capitalized around 28 billion and is currently around 25 billion. The drop is close to 11%.

Surprise in the Council

In a relevant fact sent to the stock market authorities of the United Kingdom, Etisalat, based in the United Arab Emirates (UAE), expressly ruled out its intention to present a takeover bid for Vodafone (claiming to be restricted by current British legislation) and rejected any intention to “exercise control or influence the board and management team“. However, the big surprise came just a year later with his landing on the board of directors of the British operator. Time revealed, therefore, that his purposes were different.

In a relevant fact submitted to the UK stock market authorities, Etisalat rejected any intention to control or influence the board of Vodafone

Last May, the Abu Dhabi telecom giant Emirates Telecommunications signed an agreement with Vodafone by which the CEO of the Arab firm, Hatem Dowidar (former director of the British company), joined the Vodafone board as non-executive director. The fine print details that Etisalat will maintain its position on the board as long as it does not reduce its 14.6% stake.. In addition, if it reaches 20% it will have the ability to appoint a second independent non-executive director at Vodafone.

There is speculation in the market that the group could be interested in acquiring Vodafone’s African assets, grouped in the subsidiary Vodacom, that is, the part of the business that is growing the most and has the greatest potential. For now, both operators have reached a commercial agreement whereby they will work together to provide services to large accounts, both multinationals and public administrations, and to coordinate their supply acquisitions.

Etisalat defines itself as a long-term strategic investor, with “full support” for the current management of the British firm and its business plan. “We want to build a collaboration mutually beneficial with Vodafone, with the aim of driving value creation in both companies, exploring opportunities in the changing global telecommunications market and supporting the adoption of a new generation of technologies.” In these terms, Etisalat’s own CEO, Hatem Dowidar, expressed himself.

Precisely, STC’s entry into Telefónica has also begun without express intentions of taking control of the Spanish operator. Calviño herself referred to the “friendly nature” of the acquisition despite the shock has already produced the surprise of its leadership and main shareholders.

But the latest plans of the Saudi company and the question of whether it could consider raising its participation above 10% (it now has 9.9%), a move for which it would need the approval of the Government of Pedro Sánchez for the recently released anti-opas shield, flies over the market these days. Time will tell.

Tom Roeser Staff

Tom Roeser Staff

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