Home » News » Will Telecom Egypt resort to “Right of pre-emption” with a Vodafone deal, or will it sell its shares? (analyzing)

Will Telecom Egypt resort to “Right of pre-emption” with a Vodafone deal, or will it sell its shares? (analyzing)

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Economic analysts said that Telecom Egypt, the largest fixed-line operator in Africa and the Middle East, will not resort to the right of pre-emption in the purchase of Saudi Telecom for about 55 percent of the shares of Vodafone Egypt.

And the Saudi Telecom Company signed last week a non-binding memorandum of understanding with Vodafone International to buy 55 percent of the shares of its subsidiary, Vodafone Egypt, with an initial value of $ 2.392 billion.

Telecom Egypt owns 45 percent of Vodafone Egypt’s shares.

The right of pre-emption allows Telecom Egypt the priority to purchase Vodafone’s global shares in its Egyptian unit at the same price, terms and conditions for the final agreement between it and Saudi Telecom within a specified period as stipulated in the shareholders agreement between the two sides.

Amr Al-Alfi, head of research at Shuaa for Securities Trading, said that it is “unrealistic” for Telecom Egypt to resort to the right of pre-emption and buy the rest of the shares of Vodafone Egypt … the Egyptian company has debts of about 15 billion pounds and does not have sufficient liquidity to finance such deals.

“It is better for her to resort to selling her stake to Saudi Telecom as well, but the question is will Saudi Telecom buy from them? How much? »

The list of the financial position of Telecom Egypt on September 30 shows that the debts owed by the company amount to about 15 billion pounds, while the available liquidity of the company is 1.4 billion pounds.

The initial evaluation of Vodafone Egypt by Saudi Telecom is $ 4.350 billion.

Telecom Egypt CEO did not respond to messages from Reuters to comment on the possibility of his company resorting to the right of pre-emption in the Vodafone Egypt deal.

Radwa El-Swaify, head of research at Pharos Investment Bank, believes that Telecom Egypt “will not resort to the right of pre-emption in the Vodafone deal … The Saudi Telecom offer to Vodafone is generous and Telecom Egypt has loans and it is not easy to provide financing for a deal of this size.”

Telecom Egypt said in a statement to the Egyptian Stock Exchange last week that it was closely following the procedures for Saudi Telecom’s acquisition of Vodafone’s stake in its Egyptian unit “to study all the options available to the company to deal with its investments in Vodafone Egypt”.

Money market sources told Reuters that Telecom Egypt has appointed EFG Hermes as its consultant to consider alternatives available for its investments in Vodafone Egypt.

Telecom Egypt CEO has not responded to messages from Reuters to comment on the appointment of Hermes as a consultant.

Wael Enabah, Chairman of the Royal Stock Exchange Board of Directors, said that Telecom Egypt will not resort to the right of pre-emption, “rather, it will sell its stake to Saudi Telecom and pay its debts in addition to developing its network, whether mobile, landline or the Internet.”

Nemat Shoukry, head of research at HC Securities Brokerage, agreed with him that Telecom Egypt will not resort to the right of pre-emption and the purchase of Vodafone’s global shares in Vodafone Egypt.

“We do not think that this is possible to happen,” said Hisham Al-Shebiny, head of research in Mubasher Finance, commenting on the possibility of Telecom Egypt resorting to the right of preemption.

“Telecom Egypt may not want to raise an amount similar to what Saudi Telecom may pay through bank financing so that it does not negatively affect the indicators of the company’s financial leverage, and Telecom Egypt is difficult to consider managing such an amount by increasing its capital.”

Vodafone International expects to complete the sale at the end of June 2020, but government approvals in Egypt may delay the deal until after that, whether tax or administrative measures.

The Egyptian Minister of Communications did not respond to a request from Reuters to comment on the extent to which the Egyptian government welcomed the potential deal for Saudi Telecom to acquire 55 percent of Vodafone Egypt.

The government owns 80 percent of the shares of Telecom Egypt.

The minister also did not respond to other requests for comment on the validity of any negotiations with Saudi Telecom to sell the stake.

The market share of Vodafone Egypt is about 40 percent of the Egyptian mobile market, with a number of customers of about 44 million, according to the company.

“Telecom Egypt hopes that the Saudi Telecom Company will offer it to buy its stake and it will agree then, but the most important thing and what the government is currently considering is how to compel Saudi Telecom to make a compulsory purchase offer for the full shares,” a telecom analyst at an investment bank told Reuters, asking not to be named.

“The only way they can find a legal way to treat Vodafone Egypt as a company listed on the Stock Exchange even though its shares were canceled from the market in 2006 and any amendments to the Money Market Law later that do not apply retroactively to the company … It may be that Telecom Egypt sold its stake by offering it to the stock One of the good alternatives to the government if it succeeds in convincing the Saudi company to do so.

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