Saudi Telecom delays buying Vodafone Egypt stake by 90 days

The due diligence process is facing 'logistical challenges caused by the Covid-19 pandemic', the company says

STC reached a deal to buy Vodafone's 55% stake in Vodafone Egypt as part of its regional expansion. Courtesy Saudi Telecom Company STC is also offering to acquire Otas which has missed two $290m installments on a loan it took in 2013 from 29 Turkish and international banks Courtesy Saudi Telecom Company

Saudi Telecom Company, the biggest telecommunications operator in the kingdom by market value, said it will extend the timeframe for acquiring a majority stake in Vodafone’s Egypt unit by 90 days as it needs more time to complete the deal.

The telecom company confirmed a deal earlier this year to buy Vodafone's 55 per cent stake in its Egyptian unit for $2.4 billion (Dh8.8bn) as part of its regional expansion. However, the ongoing coronavirus outbreak has led to delays in closing the transaction and the subsequent extension of a memorandum of understanding.

“STC announces that due to the logistical challenges caused by the Covid-19 pandemic, the parties need more time to complete the processes related to the transaction, including due diligence and they have therefore agreed to extend the MoU for 90 days starting from today,” the company said in a statement on Monday to Saudi Arabia’s Tadawul stock exchange, where its shares trade.

“Both parties will be working to progress the transaction as set out in the MoU during this period.”

Vodafone Egypt is the North African country's largest mobile operator in terms of active subscribers. State-run Telecom Egypt holds the remaining 45 per cent stake of the operator. The agreement with STC values Vodafone Egypt at $4.4bn.

STC is majority-owned by the kingdom's Public Investment Fund, which holds a 70 per cent stake in the firm. Its move to buy Vodafone’s stake comes as it eyes a larger market share of the region’s telecoms industry.

In February, Egypt’s Financial Regulatory Authority said that STC should make an offer to acquire Telecom Egypt’s remaining stake in Vodafone Egypt if its deal with Vodafone goes through. The regulator cited a 1992 law that would legally bind STC into making an offer on outstanding shares if the deal materialises.

Telecom Egypt later said that it is “closely following the aforementioned potential transaction to consider all of its possible investment options and opportunities.”

In 2013, STC unsuccessfully tried to acquire a 45 per cent stake of Telecom Egypt. But analysts say that Egypt’s state-owned operator would be more willing to sell its stake in Vodafone Egypt now following the launch of its own mobile network called ‘We’ in 2017.