ABU DHABI: UAE’s telecom giant with an asset base of AED143.17 billion ($39 billion), Emirates Telecommunications Group (e&), formerly Etisalat, has made a decent bargain purchase gain to the tune of AED507 million (about $140 million) from a deal that saw the company acquire 14.57 per cent stake in Vodafone in two steps.
e& has reported a net profit of AED2.66 billion for the quarter ending June 30, 2024, against a revenue of AED14.09 billion. For the six-month period ending June 30, e& reported a net profit of AED5.12 billion.
Subsidiary’s loss
In another significant note, e& said the 6.37 billion Moroccan dirham (AED2.3 billion) that e&’s subsidiary, Maroc Telecom, had to pay Wana Corporation as damages, hasn’t dent the profitability of e& during the quarter under review.
Maroc Telecom paid that substantial amount to Wana Corporation in damages ‘for unfair competition and abuse of dominant market position’ as directed by the court of law.
e& subsidiary, Maroc Telecom’s appeal was rejected by the Court of Appeal of Casablanca on July 3 in a long-fought case with its rival company, Wana Corporation, resulting in this large payout.
“The court decision did not impact the profit attributable to the owners of e& for the period, due to ‘adequate coverage of international regulatory risks’,” an e& statement explained.
e& is present in 16 countries, and outside of the UAE, the company, which is 60 per cent owned by UAE Federal Government, operates through its subsidiaries and associates in various countries.
They are divided into the following operating segments – Morocco, Egypt, Pakistan, International and others.
Vodafone stake acquisition
Coming to the deal with Vodafone, e& acquired 9.8 per cent shares in Vodafone Group on May 14, 2022. This was followed by a further increase in shareholding by e& to 14.57 per cent on March 31, 2023.
On May 11, 2023, e& and Vodafone announced signing of a Strategic Relationship Agreement and following that, the e& Group CEO joined the Vodafone Board on February 19, 2024, after all necessary approvals were received.
The investment in Vodafone, which was earlier accounted for as a financial instrument carried at Fair Value through Other Comprehensive Income (FVOCI) under IFRS 9, has thereon been accounted for using equity method under IAS 28.
Valuation holds key
On the acquisition date, e& performed a preliminary assessment of the fair value of assets and liabilities purchased and concluded that the provisional fair value of identifiable net assets acquired approximates to AED12.7 billion.
This essentially means that the purchase price was much lower than AED12.7 billion, giving a bargain purchase (gain) of AED507 million to e& on a provisional basis.
“This has been recognised by e&, and included within the share of results of associates and joint ventures,” the notes to e& financials observed.
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