And . . . relax. Vodafone must be feeling mightily relieved. Emirates Telecommunications group, or Etisalat, which is 60 per cent owned by the government of the Gulf state, said this weekend it had amassed a 9.8 per cent shareholding in the UK-headquartered telecoms group.
These are much easier people for a chief executive to have on board than pesky activist Cevian Capital, which has been using a small exposure to Vodafone to push for disposals, consolidation and localisation of operations.
In contrast, the purchase by Etisalat appears to be a case of Friends Reunited. The investor, now going by the gimmicky handle “e&”, is run by Hatem Dowidar. He is an old Vodafone hand whose previous roles included regional director of emerging markets. These brought him into close contact with Vodafone boss Nick Read.
Read could use a friendly face. Vodafone has flubbed a few deals, most recently in Spain. Read will field uncomfortable questions when reporting full-year results on Tuesday. These will focus on spending, operational trends and a mooted merger of the UK arm with CK Hutchison’s Three.
A state-owned entity should prove more accommodating of an ex-growth stock with a chunky 6.3 per cent historic dividend yield. Dowidar expressed his support for the board, management and existing strategy.
The investment does not give Read a complete free pass. Plenty of other investors support Vodafone’s stated aims; their gripe is with the lack of delivery. And even a friend wants bang for their buck when they are spending $4.4bn.
The United Arab Emirates telco is clearly chasing growth; witness its acquisitions in recent years, such as German cyber security group Help, food couriers elGrocer and Khazna Data Centers.
Previous deals concentrated on smaller players and emerging markets. Vodafone is large and international. Its market worth is half that of e& but its enterprise value is far higher.
There are several ways e& could play this, beyond pure value investment. It could encourage disposals and buy some of Vodafone’s emerging market businesses via open auctions. It might bid for Vodafone itself, though it has ruled out this option for the moment.
It looks as if e& is following the playbook of BT investor Patrick Drahi albeit in a friendlier manner. The market is more hopeful of a shake-up, which might include a takeover, materialising at the UK’s dominant telecoms group. Cevian’s catalysing role now includes getting e& on side and will be accordingly harder.