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Wednesday, 08 April 2020

Telecom Egypt affirms entitlement to preemption right, says has right to accept mandatory purchase offer

Telecom Egypt, which owns 45 percent of Vodafone Egypt, said the preemption right is "guaranteed under a shareholders' agreement and the main system of Vodafone Egypt"

Ahram Online , Thursday 13 Feb 2020
Telecom Egypt
Egyptian people are seen in front the headquarters of Telecom Egypt in Cairo, Egypt, September 21, 2017 (Photo: Reuters)
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Telecom Egypt affirmed on Thursday that it is entitled to claim the right of preemption in the potential sale of a majority stake of Vodafone Group's Egyptian unit to Saudi Telecom Co (STC).

Vodafone Group struck a preliminary deal last month to sell 55 percent of its shares in Vodafone Egypt for $2.39 billion. It said at the time that the deal was expected to close by June.

Vodafone is Egypt's biggest mobile operator, with over 40 million subscribers.

Telecom Egypt, which owns 45 percent of Vodafone Egypt, said the preemption right is "guaranteed under a shareholders' agreement and the main system of Vodafone Egypt."

The company also has the right to accept a "mandatory purchase offer" for its shares in Vodafone Egypt as prescribed by Egypt’s Financial Regulatory Authority (FRA), it added in a statement on Thursday.

The financial regulator said last week that STC must offer to buy Telecom Egypt's stake if it goes ahead with the deal, under a 1992 law requiring a compulsory tender for any outstanding shares.

Wael Ziada, telecoms analyst and head of investment company Zilla Capital, told Ahram Online that "the [preemption] right gives the company the priority to buy Vodafone's share if it submits an equivalent or bigger offer than that of STC."

Ziada added, however, that this scenario is unlikely given that the company is billions of pounds in debt, partially as a result of the launch of its own mobile network WE in 2017.

If it does buy Vodafone Global's stake, Telecom Egypt, which is predominantly owned by the govenment, would effectively own two of the country's four existing mobile service providers, which would be "unprecedented and would undermine competition in the market," Ziada said.

Given all this, "the best choice for the company is to sell its shares to STC," Ziada said.

In its statement, Telecom Egypt said it would "use any other rights guaranteed by Egyptian laws and the shareholders' agreement" and pledged to take "all measures to make the best use of these rights for all its stakeholder."

The company's spokesman contacted by Ahram Online was not immediately available for comment.

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