Iliad's Niel moves on Vodafone to become biggest shareholder

　　As a prolonged heatwave continues to leave Brits gasping, French billionaire Xavier Niel just raised the temperature in UK telecom with the acquisition of a 16.2% stake in Vodafone Group that will make his investment firm the operator's largest shareholder.

　　Niel's Vega acquisition vehicle entered a binding agreement with UAE-based telecom group e& to buy its entire stake in Vodafone, representing a 16.21% shareholding and 17.13% in total voting rights, for approximately £4.4 billion (US$5.9 billion) in cash.

　　Vega, which was set up to house the Vodafone shareholding, said it intends to be "a committed, long-term shareholder and supportive partner to Vodafone."

　　It also quashed potential speculation that the investment is an opening gambit for a full takeover of Vodafone. In the context of pending UK regulatory scrutiny, Vega said it does not intend "to make an offer for the entire share capital of Vodafone."

　　Niel described Vodafone as "a compelling investment opportunity" with a "diversified geographic footprint."

　　"As a simpler, more focused business, Vodafone is ready for a new phase of growth and is well-placed to unlock substantial untapped value across its European and African operations," he said in a statement.

　　He also hinted that Vega could be a hands-on shareholder and more vocal about strategy, which could make things interesting for Vodafone CEO Margherita Della Valle.

　　Niel said his firm is "ready to contribute our deep sector expertise and operational know-how," to Vodafone. And he pointed to past investments in Tele2 and Millicom as examples of "helping businesses to perform better."

　　The billionaire made his mark as a disruptor in European telecom in 2012 with the launch of Iliad as the fourth mobile operator in France. Iliad "wreaked havoc" in the French mobile market, according to Kester Mann, director for consumer and connectivity at analyst firm FDM CCS Insight. "It now has over 40 million customers in a footprint that also includes Italy, Poland and Ireland."

　　"A full takeover of Vodafone is not an option, but it will be interesting to see how influential he wishes to become. His strong ambitions in AI and cloud services could support Vodafone's enterprise strategy," he said.

　　Niel acquired a 2.5% stake in Vodafone in 2022 via his investment firm Atlas Investissement. Meanwhile, Iliad Italy was an ardent suitor for a merger with Vodafone Italy but was rejected and the Italian business was sold to Swisscom's Fastweb in March 2024.

　　e& steps back

　　For e&, the stake sale marks a retreat from its recent international expansion. The UAE operator said it decided to sell its stake in Vodafone after a review of its investment portfolio outside its home market.

　　Its relationship with Vodafone started in 2022 when e& acquired a 9.8% stake in the operator and steadily increased its shareholding. In May 2023, the operators agreed a strategic relationship, with e& holding a 14.6% stake and gaining a seat on the board of directors for e& CEO Hatem Dowidar as a non-executive director.

　　The operators also agreed to collaborate on joint services for multinational enterprises, procurement, roaming and technology development.

　　That deal has now been terminated and Dowidar has resigned from the board with immediate effect.

　　However, it appears that the operators will continue to work together in the areas originally agreed. In its statement on the stake sale, e& said it "appreciates the constructive partnership with Vodafone and looks forward to exploring future opportunities to collaborate in ways that create mutual value."

　　Mann said e&'s exit is "surprisingly sudden" and that the news "indicates that the middle East company is taking a step back from its strategy to become a global telecom and technology player and now wishes to concentrate on its core businesses," he said.

　　For Vodafone, the stake sale to Niel's Vega is the latest of multiple structural changes, as Mann pointed out that the operator "has been transformed under Della Valle, selling out of struggling markets like Spain and Italy and securing the merger with Three in the UK."

　　Now the question is just how much impact Niel will have on Vodafone's strategy.

　　Vodafone Group's share price jumped on the news, up 13% at midday.