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Vodafone in talks to sell Egypt stake

Page last updated at Friday, May 21, 2010 7:07 AM // Leave Your Comment

Vodafone  is in early stage talks about selling its controlling stake in Vodafone Egypt, the country’s second-largest mobile phone operator, in a deal that could be worth £3bn ($4.3bn).

Telecom Egypt, the country’s leading fixed-line phone company, has approached Vodafone about buying the UK group’s 55 per cent stake in Vodafone Egypt.

People familiar with the situation said talks about a possible deal began about one month ago, but they stressed no decisions had been taken. Vodafone declined to comment. Telecom Egypt said that it was not aware of the talks.

Robin Bienenstock, analyst at Bernstein, said Vodafone could expect to receive about £3bn for its controlling stake in Vodafone Egypt.

Telecom Egypt already owns 45 per cent of Vodafone Egypt, and Tarek Tantawy, the fixed-line phone company’s chief executive, said this month that it was considering how it could enter the domestic mobile market.

If a transaction is finalised, it would underline how Vittorio Colao, Vodafone’s chief executive, is willing to slim down the UK mobile group’s large portfolio of assets. Mr Colao said at Vodafone’s annual results on Tuesday that the group was focused on developing its businesses in Europe, sub-Saharan Africa and India. As well as considering the case for disposing of some of Vodafone’s minority stakes in mobile operators, Mr Colao is also willing to contemplate selling some of the UK group’s controlled assets.

Mr Colao described Vodafone’s relationship with Telecom Egypt as “very good”.

The Egyptian mobile market is expected to become more competitive after last month’s settlement between France Telecom and Orascom Telecom, the joint controlling shareholders in ECMS, Egypt’s largest mobile operator.

Their decision to end their bitter standoff means that Mobinil could become more aggressive.

Egypt’s third mobile operator is Etisalat, the Dubai-based telecoms company that paid $2.6bn in 2006 for an Egyptian operating licence.

If no deal is finalised with Vodafone, Telecom Egypt could try and secure its own mobile operating licence. The Egyptian government has not ruled out issuing a fourth licence.

Vodafone Egypt’s revenue growth has slowed markedly in the past two years because of a combination of the economic slowdown and rising mobile phone ownership in Egypt. Almost 70 per cent of the population owns a mobile.

However, Vodafone Egypt is highly profitable, and generated £488m of operating cash flow in 2009-10. The margin at the level of earnings before interest, tax, depreciation and amortisation was 50 per cent in 2009-2010.

Source: FT



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