Vodafone Group has agreed to sell its 55 percent stake in Vodafone Egypt to Saudi Telecom Company (STC) for USD 2.39 billion cash. This gives the mobile operator co-owned with Telecom Egypt an enterprise value of USD 4.35 billion and a multiple of 7.0x adjusted EBITDA for the year to September.
The final price will be determined upon signing of the definitive agreement, after due diligence. On completion of the transaction, the companies plan to enter into a Partner Market Agreement, so the Egyptian operator can continue to use the Vodafone brand, preferential roaming arrangements, Vodafone's central procurement and a range of other services.
In addition, Vodafone will continue to have a significant presence in Egypt through its Shared Services centres there, recently rebranded as VOIS (Vodafone Intelligent Solutions). The centres in Cairo, Giza and Alexandria employ around 7,800 people and provide a range of services to Vodafone's operations around the world. Vodafone has plans to recruit at least 1,000 more people over the coming 12-18 months.
The sale is expected to close by the end of June, subject to regulatory approval. Vodafone said the divestment is in line with its efforts to simplify the group to the two regions Europe and sub-Saharan Africa. The sale will also help reduce its net debt.
Telecom Egypt said in a statement that it met with representatives from Vodafone Group on 28 January to discuss the transaction. Vodafone stressed that it was committed to all of Telecom Egypt's rights as per the agreement of Vodafone Egypt’s shareholders. Telecom Egypt said it would consider its rights, but the company earlier said it has no intention of selling its stake in the mobile operator.
Vodafone Egypt is the largest mobile operator in Egypt, competing against three other players, including Telecom Egypt's We. In the year to September 2019, the operator contributed EUR 1.2 billion in revenues, EUR 600 million in adjusted EBITDA and EUR 211 million in capex to the Vodafone Group.
For Saudi operator STC, this marks its first expansion outside the Gulf area, adding to its foreign operations in Kuwait and Bahrain. The company said the deal is part of plans to expand in the MENA region.
