Business Middle East Qatar

Vodafone sells out of Qatar for 301 million euros, brand will remain

LONDON (Reuters) – Vodafone (VOD.L) said on Monday it would sell its stake in Vodafone Qatar VFQS.QA to its joint venture partner, the Qatar Foundation, for 301 million euros ($371 million) but keep its red brand present in the country under a future partnership deal.

Qatar has faced an embargo from Arab countries since June last year and the business has not been one of the stronger performers in the Vodafone portfolio, but a person familiar with the situation said the decision stemmed from its wider move to sell assets it did not control.

The world’s second biggest mobile operator has spent several years selling minority stakes under its Chief Executive Vittorio Colao, who is seeking to streamline the sprawling group, exiting countries such as Poland, China and France.

Vodafone and the Qatar Foundation, a semi-private educational organization founded by the emir’s father, hold 45 percent of Vodafone Qatar through a joint venture, with the rest of the operator owned by the government of Qatar and other investors.

Vodafone holds 51 percent of the joint venture.

The British company said despite the sale its brand would remain in Qatar as part of a partnership agreement that will run for an initial term of five years.

The transaction values Vodafone Qatar, which provides mobile and fixed-line services to around 1.4 million customers, at an enterprise value of 1.45 billion euros.

“We have experienced great success over the years in building our joint business in Qatar and always enjoyed a strong working relationship with the Qatar Foundation,” said Vivek Badrinath, head of Vodafone’s Africa, Middle East and Asia-Pacific region said.

“As the company embarks in a new phase of its journey, we now look forward to continuing our involvement with the business through a long-term, branded partnership agreement and are committed to its ongoing success.”

Moreover, Vodafone Qatar’s licence, originally granted by the Communications Regulatory Authority for 20 years, has been extended for an additional 40 years until 2068, which will greatly help reduce annual amortisation costs from QR403mn to about QR100mn, making it profitable in the foreseeable future.

The board has also suggested halving the face value of its shares to QR5 in order to address the QR4.27bn accumulated losses, largely on account of the amortisation costs of the licence. However, this will have no cash impact on the Qatar Stock Exchange-listed company.

The other shareholders of Vodafone Qatar include General Retirement and Social Insurance Authority with 6.69% stake, Military Pension Fund (General Retirement Authority) 5.23% and Qatar Foundation for Education, Science and Community Development 5%.

Vodafone Qatar alos appointed Sheikh Hamad bin Abdullah al-Thani as new chief executive officer and Rashid al-Naimi as managing director.

Al-Naimi, who is the chief executive of Qatar Foundation (QF) Endowment and responsible for QF’s investment portfolios, has been elected as managing director with immediate effect.
Sheikh Hamad will replace Ian Gray who has decided to retire and step down following the company’s annual general assembly, scheduled to be held on March 19, 2017.

Sheikh Hamad, who holds a BA in Computer Science from the University of Ottawa in Canada, currently holds the role of Vodafone Qatar’s chief operating officer.
Since joining Vodafone Qatar in 2013, he has served in several roles including senior business development manager, head of public sector sales and sales director.

Here are highlights from a press conference in Doha explaining the restructuring:

  • The license extension will reduce annual amortization costs from 403 million riyals to 100 million, which will make the company profitable
  • Balance sheet restructuring will cut its share capital by half to 4.3 billion riyals to eliminate the accumulated losses
  • Reduction in share capital has “no cash impact,” Gray said, and will pave the way for the company to pay dividends to shareholders in the future
  • Company will focus on investing on its fixed line business, Internet of Things, and technology services to increase revenue as subscriber growth flattens, Sheikh Hamad said
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