Vodafone may need to buy out its government-backed mobile partner in Egypt after the state regulator said that Telecom Egypt would need to acquire its own licence in the country.
Telecom Egypt, which is the country’s monopoly provider of fixed-line services and is mostly owned by the government, will need to buy a licence to launch mobile services for E£2.5bn. As a result, Telecom Egypt may need to dispose of its 45 per cent stake in Vodafone’s local business. Analysts last year valued the stake at more than £1bn.
However, the exact value of the business is uncertain given the shift in political and economic conditions in the country, as well as the fact that Telecom Egypt itself will become a competitor.
Vodafone has first refusal on acquiring the stake, or it could try to encourage Telecom Egypt to either sell to another local partner or even float shares on the local stock exchange.
Under plans announced in Cairo, Telecom Egypt will buy a unified licence to extend its fixed line monopoly into mobile services using the networks owned by competitors.
Telecom Egypt will acquire the licence for two years until the sale of the next tranche of 4G mobile spectrum.
Mohamed El-Nawawy, chief executive of Telecom Egypt, said: “Our customers require high quality, competitively priced total telecommunications services.”
Analysts at Espirito Santo said that the launch of a competing mobile service was likely to result in Vodafone acquiring the minority stake. “Depending on execution by TE, this could have material implications for the growth prospects of Vodafone Egypt and other Egyptian mobile operators in 2014-15 and beyond.”
Vodafone has examined referring the situation to international arbitration if Telecom Egypt was given access to the country’s mobile networks. Vodafone declined to comment.
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