Qatar state fund ready to buy stake in Vodafone Egypt

Qatar is in advanced talks to buy around $2.5 billion of state-held stakes in Egypt’s biggest mobile network operator and other companies, as the North African nation lines up funding to cope with the economic fallout of Russia’s invasion of Ukraine.

Under the potential pact, which is expected to be finalized by the end of this year, Qatar Investment Authority would acquire 20% in Vodafone Egypt from Telecom Egypt Co., according to people with knowledge of the matter. The QIA is the Gulf state’s sovereign wealth fund and oversees an estimated $445 billion in assets.

The people, who asked not to be named because the talks are confidential, didn’t identify the other firms, saying only that they weren’t listed on Egypt’s stock market.

A deal would be a boost for Egypt’s troubled economy, which is grappling with soaring food and fuel bills after Russia’s invasion of Ukraine and an exodus of foreign investors in its local debt. Gulf Arab states have already pledged upward of $20 billion in deposits and investments, while Egypt is close to securing sorely needed International Monetary Fund assistance.

Telecom Egypt, some shares in which have been listed since 2005, rose 4.4% by the close of trade on Egypt’s stock exchange on Wednesday, reaching their highest level since early March.

Market Pioneer
State-owned Telecom Egypt, which began operating in 1854 with the first telegraph line connecting Cairo and Alexandria, acquired its 45% stake in Vodafone Egypt to gain a strategic foothold in the mobile telecommunications market prior to founding its own provider, WE, in 2017.

The UK’s Vodafone Group owns 54.9% stake of Vodafone Egypt, and while there was an agreement to sell a majority stake in the company to its Johannesburg-based subsidiary Vodacom Group Ltd. for $2.7 billion last year that transaction hasn’t closed.

Egypt’s sovereign wealth fund, the QIA and Telecom Egypt all declined to comment. Ayman Essam, Vodafone Egypt’s spokesperson, said it was “not officially aware of the deal” and declined to comment further.

Qatar’s support for the now-defunct Muslim Brotherhood administration that held power in Egypt shortly after the 2011 uprising which ousted Hosni Mubarak strained its relationship with the incumbent government, and the pending investment accord is the latest sign that ties are on the mend.

Warming Ties
Egyptian President Abdel-Fattah El-Sisi visited Doha last month, and a port cooperation agreement was signed. And earlier this year, Qatar deposited $3 billion into Egypt’s central bank to help the most populous Arab nation contend with soaring food costs.

Read More: Saudi Arabia’s $10 Billion Pledge to Egypt Delivers First Deals

Qatar is among the world’s richest countries due to its plentiful gas reserves, and the government has been taking steps to diversify the economy in anticipation of a decline in earnings as reserves become depleted and the world moves away from fossil fuels.

Founded in 2005, the QIA has vowed to plow more money into Asia and the US after years of substantial investment in Europe. Even so, it participated in Porsche AG’ s 9.4 billion-euro ($9.1 billion) initial public offering, acquiring a 4.99% stake.

Earlier this year, the QIA trimmed stakes in a number of listed assets and bought into closely-held technology companies in growth markets, marking a major strategy shift for one of the world’s largest sovereign wealth funds. Bloomberg