What does Vodafone International sell its stake in Egypt mean?

Cairo- Vodafone International sold a few days ago its 55% stake in Vodafone Egypt to its subsidiary Vodacom operating in the South African market, in a surprise deal for the market, the details of which were kept secret for months, and are still subject to regulatory and legal approvals by the authorities. concerned in both Egypt and South Africa.

According to sources at the Ministry of Communications, Vodafone Egypt submitted a request at the end of last week to the Telecommunications Regulatory Authority, declaring its intention to change the ownership of shares.

The examination of the device takes several months for Vodafone’s request to decide on it, after reviewing the required data from the company, and guarantees of the rights of partners and customers, and the process of completing the transfer of ownership is expected to be completed by March 31.

And the new owner of the global company's shares in Vodafone Egypt is the South African Vodacom, and it pays 2.7 billion euros for the stake.

Ease the burden or search for improved services?

Followers of the mobile market in Egypt see that the deal is a relief for the global group’s burdens in Egypt, after the failure of a previous attempt to sell its stake in Vodafone Egypt to the Saudi “STC” company for $2.39 billion, which remained in place since the beginning of last year until its end. When the deal was declared unsuccessful.

With this deal, Vodafone International reduces its stake in Vodafone Egypt, and Vodacom will acquire the company's 55% stake in Vodafone Egypt.

Thus, Vodafone International owns 60.5% (which is its current stake in Vodacom) of its previous stake in Vodafone Egypt, which amounted to 55%, meaning that it now owns only less than 40% of Vodafone Egypt.

However, an official at Vodafone Egypt - who reserved his name - confirmed to Al Jazeera Net that Vodafone International will increase its stake in Vodacom to 65.1% with this deal after clearing the exchange of shares between the two companies, which means that its percentage of the final profits will increase, and will not decrease with the decrease in the proportion of the direct group in Vodafone Egypt.

The source stressed that all decisions and operational matters for Vodafone Egypt will remain in the hands of Vodafone International, as it is the final owner of Vodafone.

The global group had previously announced that it wanted to exit from a number of emerging markets, including the Egyptian market, to reduce financial and operational burdens.

However, analysts saw the repeated selling efforts as an attempt to avoid the operational problems arising from working in the Egyptian market, as Vodafone faced obstacles in erecting towers and obtaining higher frequencies.

This was reflected in the quality of services provided to network users recently, which Vodafone has distinguished in Egypt since its entry into the local market, and was the first to introduce new global technologies in the market all the time.

The Telecommunications Regulatory Authority approved penalties of about 25 million pounds (the dollar is about 16 pounds) against telecommunications companies, including Vodafone Egypt, due to the decline in the quality of services.

In a report on the quality of mobile services issued by the Communications Authority for the third quarter of 2021, it monitored areas that suffer from problems in the quality of the company's voice services, to record the decline in services in 28 out of 81 regions (Wahi City) in which measurement tests were conducted.

In its data, Vodafone International says that it has invested in Vodafone Egypt more than 70 billion pounds since entering the Egyptian market, and succeeded in leading the mobile market with more than 44 million subscribers, as well as issuing an electronic money transfer service with about 11 million users.

What does Vodacom gain from the deal?

In a statement by Vodacom, it confirmed that its purchase of Vodafone's global stake in Egypt comes as part of its "striving to strengthen its presence on the continent and increase its profitability, especially in the field of financial services."

Vodacom was the company that preceded the introduction of the idea of ​​converting a mobile phone to an electronic wallet in Kenya, a service through which funds are kept in the wallet, and transferred between users, in what was later known as "Vodafone Cash".

Vodacom is looking to expand its newly launched digital payments service (Voda Pay) in the Egyptian market.

With the purchase, Vodacom will hold on to the northern (Egypt) and southern (South Africa) ends of the continent, "giving Vodacom a strategic position that enables it to achieve growth in a rapidly growing market for telecommunications and information technology."

Vodacom said the agreement would also expand its coverage to 37,000 network sites, making it one of the largest owners of telecom towers in Africa. Vodacom expects the deal to diversify the Vodacom Group's operating profit growth potential in the medium term.

What is the position of the local partner? Why didn't he buy the global partner's share?

Prior to Vodafone Egypt notifying the telecommunications authority of the deal, Telecom Egypt received a similar notification as a partner that must be notified of the decisions and moves of the main partner, in accordance with the shareholders’ agreement, and it has the right to purchase the stake with pre-emption in the event of offering it for sale.

Despite the company officials' reluctance to mention the details of the negotiations with Vodafone, Vodafone's continued sale of its stake to Vodafone means, in general, the refusal by "Egyptian" to buy Vodafone's share due to the high consideration, as well as the lack of necessary liquidity, as Telecom Egypt was forced to borrow dollars from non-Egyptian banks to finance Operations a few weeks ago.

According to company sources, the deal to sell Vodafone’s global stake in its unit in Egypt to Vodafone dates back to before the middle of this year, when Vodafone International offered to sell its stake to Vodafone Egypt right of pre-emption. Vodafone Group obtaining the right to transfer the ownership of its stake in Vodafone Egypt within the Vodafone Group, conditional on the submission of the new shareholder - to whom the share has been transferred - a deed of commitment to all the terms contained in the amended shareholder agreement.

The amended Telecom Egypt agreement with Vodafone International stipulates obtaining a portion of the profits annually, starting from next year, at least 60%, while Vodafone International had previously preferred to carry over the distribution of profits to subsequent years, to finance the expansions of its local unit in Egypt.

And Telecom Egypt obtained the right to sell part of its stake to any potential buyer of the Vodafone Group stake, without conflicting with any other rights stipulated in Egyptian law, including the right to accept a compulsory purchase offer.

And Telecom Egypt is a government company that runs a mobile network competing with Vodafone, the “WE” network among 4 mobile operators in the country.

How was the stock market affected by the deal?

The Egyptian Stock Exchange was not affected much by the deal; The main partner (Telecom Egypt) its listed stock rose slightly, amounting to 0.44%, until the middle of the trading session on the day the deal was announced last Wednesday, with transactions worth 32.4 million pounds.

Vodafone Egypt has a small presence in the stock market with about 0.2% of Vodafone Egypt shares, which explains - in the opinion of observers - the stock market was not affected by the deal, although the same share rose in the OTC market, from 70.52 pounds per share to 137.77 pounds, or 95.36%, When it announced an offer to sell a stake in Vodafone Egypt to the Saudi company.

A tumultuous history for Vodafone in Egypt

Vodafone's entry into Egypt has been noisy since its inception. When it was announced at the end of the nineties of the last century that it had offered a second license to operate a mobile phone, it was offered by local investors, most notably the late businessman Mohamed Nassir, and businessman Naguib Sawiris competed for it.

The deal was captured by Naseer's alliance, consisting of his company, Vodafone International, and "Air Touch" company in 1998, known at the time as "Click GSM", and it was the second mobile operator.

The deal caused an uproar in the market, and Sawiris sought state leaders to compensate for his loss, saying in press statements, "If my name was Muhammad, I would have taken the license," noting that he was excluded because of his religious affiliation as a Christian, and he was satisfied by giving him the first license to operate the phone, which was owned by Telecom Egypt. Later, it was called "Mobinil" and now it was called "Orange". The two companies competed alone in the market until 2007, when a third license was offered.

Just one year after obtaining the second mobile license, the Vodafone Group acquired the Air Touch stake. In 2002, it acquired the share of the French international partner "Vivendi", then changed the brand from "Click GSM" to Vodafone Egypt.

The structure of the shareholders in Vodafone Egypt changed again with the entry of Telecom Egypt with a 44.94% stake.