Middle Eastern telco e& acquires 9.8% stake in Vodafone

Middle Eastern telecommunications firm e& has picked up an almost 10% stake in British mobile phone company Vodafone amid pressure for a shake-up of the business.

e& confirmed over the weekend that it had made a £3.3bn raid on the UK group as part of an effort to gain "significant exposure to a world leader in connectivity and digital services".

However, the Abu Dhabi-based state-controlled company vowed that it had no intention of launching a takeover bid and said it wanted to be a "long-term and supportive shareholder in Vodafone".

e&'s move comes after Vodafone revealed it was in talks with rivals across the UK, Spain, Germany and Italy amid pressure from Swedish activist investor Cevian, which called for a business shake-up when it picked up a stake in the telco.

Discussing the deal, JPMorgan's Akhil Dattani said: "Whilst a surprising turn of events, at face value this seems nothing more than an opportunistic move from a company with a net cash position, and a clearly stated M&A driven agenda. Etisalat considers Vodafone attractively valued, is supportive of the existing management team and strategy, and says it is not looking to exert any control or influence.

"That all said, one cannot completely rule out the possibility of Etisalat becoming more interventionist over time, especially as we struggle to rationalize the strategic merit in them being a purely passive minority investor. We note Etisalat has the firepower to increase its Vodafone shareholding (should it so desire), and are mindful that Vodafone has long been criticized for capex warnings, operational disappointment, excess complexity, and a poor M&A track record – making it a prime target for activism."

Vodafone will publish its full-year results on Tuesday.

As of 0825 BST, Vodafone shares were up 3.06% at 121.42p.

Reporting by Iain Gilbert at Sharecast.com