e& had increased its stake in Vodafone to 14.4% last year
The U.K. government says that the stake in local carrier Vodafone held by United Arab Emirates-backed telecoms group poses a national security risk to the country.
The Cabinet Office recently issued a notice warning that the 14.6% stake held in Vodafone by Emirates Telecoms, also known as e&, represents a security concern for the authorities due to the strategic role of Vodafone in the U.K.’s telecommunications market and given the telco’s role in contributing to the U.K.’s cybersecurity and as a supplier to government departments.
The government ordered Vodafone to organize a national security committee with the aim of overseeing and monitoring any sensitive work it carries out which could have an impact on national security. The U.K. government highlighted that this action was necessary and proportionate with the aim of mitigating the risk to national security.
e&, which is 60% owned by the UAE government, increased its ownership in Vodafone to 14.6%. The UAE telco had initially invested £3 billion ($3.82 billion) in Vodafone in 2022. Under the terms of the strategic partnership, e& can increase its stake in the U.K. carrier to just under 25%.
As part of the deal, the CEO of e& was given a seat on Vodafone’s board subject to regulatory approvals, with the Arab telco also given the opportunity to appoint an independent non-executive director if its stake in Vodafone increases above 20%.
The Cabinet Office also noted the partnership would enable e& to “materially influence policy at Vodafone”. Oliver Dowden, secretary of state at the Cabinet Office, has made several orders, including requirements that the U.K. government be notified if any element of the relationship changes.
Last year, Vodafone Group and CK Hutchison Group Telecom Holdings had entered into binding agreements in relation to a combination of their telecommunication businesses in the U.K., respectively Vodafone UK and Three UK.
The new entity will have 27 million customers, which would make it the largest mobile network in the U.K., according to published reports. Under the terms of the deal, Vodafone will own 51% of the new entity while Hutchison Group will own 49%.
The transaction is expected to close before the end of 2024, subject to regulatory and shareholder approvals.
