Saudi Telecom’s purchase of 55% stake in Vodafone Egypt to boost revenue growth: Aljazira Cap

Saudi Telecom Co.’s (STC) acquisition of a 55% stake in Vodafone Egypt is expected to boost the telecom operator’s presence in the Middle East and North Africa (MENA) region, Aljazira Capital said in a report.

The report noted that there is high growth potential in the Egyptian market, which may help accelerate STC’s revenue growth since Vodafone Egypt is the country’s biggest mobile operator, with a client base of 39.9 million subscribers and a market share of 43%.

“It is the right time for STC to invest in Egypt amid potential growth forecasts, and the Egyptian Pound’s (EGP) 10% appreciation last year,” Aljazira said.

Furthermore, Vodafone Egypt’s existing strong position and STC’s experience of the 4G and 5G rollout should have synergistic effect as well.

Key risks are represented in the EGP devaluation, as the $1 billion Eurobond repayment is scheduled during April 2020.

“We believe that the company is well positioned to tap opportunities in the Internet of Things (IoT), cloud, 5G, and enterprise solution segments,” Aljazira said.

The brokerage firm maintained its recommendation of “Overweight” on STC with a target price (TP) of SAR 112.2 per share.

According to data compiled by Argaam, STC recently signed a non-binding memorandum of understanding (MoU) with Vodafone to acquire its 55% stake in Vodafone Egypt. The deal is estimated at $2.4 billion (SAR 9 billion), valuing Vodafone Egypt at $4.4 billion (SAR 16.3 billion).