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Telecom Egypt angling for Vodafone buyout as fourth Egyptian licence is shelved

According to reports, Telecom Egypt is aiming to resume negotiations with Vodafone over a potential takeover of the UK-based firm’s Egyptian operations. Telecom Egypt, which has a monopoly over the country’s fixed-line market, holds a 45% stake in Vodafone Egypt; last year it unsuccessfully attempted to acquire the remaining assets from its partner.

Telecom Egypt’s interest in a buyout appears to have been rekindled after the Egyptian government abandoned plans to issue a fourth mobile licence. The country’s Communications Minister Magued Osman stated: “There are a lot of changes in Egypt now and we are not sure whether launching a new licence at this moment is the right decision from the economic point of view.”

There has been considerable political upheaval in Egypt since the collapse of the deal last year, with the entrenched ruler Hosni Mubarak eventually forced to cede power following widespread street protests. Controversial measures implemented by the authorities in response to the protests included blocking access to mobile networks and the Internet, as well as forcing operators to send pro-Mubarak text messages to subscribers.

Whether these factors affect Vodafone’s long-term plans for its Egyptian operations remains to be seen, but there is a chance that they could provoke a withdrawal from the market. Standard & Poor Equity Research analyst James Crawshaw commented: "They were looking to sell previously; it could be another boost for the shares if they can sell it for a good valuation.”

Vodafone is currently offloading its more peripheral assets, having recently sold stakes in China Mobile and French operator Vivendi. It is also widely believed that the firm will soon dispose of its stake in the Polish Polkomtel.

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