Merger deals could be a lifeboat for telecom companies in the face of economic pressures. Experts in the telecom sector believe that the Egyptian market could be involved in mergers in the telecom sector, considering the potential deal to sell Telecom Egypt’s stake in Vodafone Egypt as an entry point for this type of deal.
Experts attributed companies resorting to mergers to the global economic challenges and the imposed economic slowdown. Companies need to form larger entities that are more tolerant of these pressures.
Hisham Abdel Ghaffar, managing director of the MENA Gross Investment Fund, which specializes in investing in startups, said that global economic pressures will push companies towards mergers, to reduce the pressures resulting from the current economic conditions.
Britain’s Vodafone and Hutchison announced their £15bn ($19bn) merger last week. They commented on that saying that creating a market leader would drive competition and investment in the country, according to Reuters.
Regarding the possible merger of Vodafone Britain and Hutchison, Abdel Ghaffar believes that the British economy in particular is under economic pressure as a result of its withdrawal from the European Union Treaty, as well as the negative effects of the inflationary recession that has hit the world’s economies recently.
He said that the merger between these organizations in the telecommunications sector has become more of a reality in Egypt about a year ago. This was seen in transferring Vodafone Egypt’s share from the global group to one of the group’s subsidiaries, the South African Vodacom.
Etisalat by e& has increased its stake in Vodafone International to 14% last February.
The company said in a previous statement that it had raised its stake in Vodafone Group to approximately 3.8 million shares, representing 14% of the company’s shares, excluding treasury shares.
Abdel Ghaffar does not rule out that Telecom Egypt’s share in Vodafone Egypt is one of the potential mergers in the Egyptian market, by completing the sale to Qatar’s sovereign Authority.
Telecom Egypt, which is 70% owned by the Ministry of Finance, owns about 45% of Vodafone Egypt, while the rest is owned by Vodacom South Africa.
Hamdy El Laithy, former vice president of the Chamber of Information Technology Industry, said that the global and local economic situation indicates new trends that may result from potential mergers and acquisitions deals.
He believes that changes in the market are positive. They would allow for a movement in the market, as the stable situation in the telecom markets for long periods causes stagnation.
It is believed that new players entering the market, or a transfer of ownership of stakes in companies, will be like a stone in stagnant water. New players enter with their own vision and plan for development.
He explained that the potential deal to sell Telecom Egypt’s stake in Vodafone is a good opportunity for a new player to enter the Egyptian market and may be an entry point for a potential deal to fully acquire the rest of Vodafone Egypt’s shares.
He believes that this kind of movement in the Egyptian market will accelerate the pace of launching the fifth generation (5G) technology in Egypt, whose launch may be witnessed by 2026, according to El Laithy.