- Oops!Something went wrong.Please try again later.
The chief executive of Vodafone was left blindsided after a Gulf company run by his former colleague swooped on the British telecoms giant to become its biggest shareholder.
Nick Read is understood to have met Hatem Dowidar, a former Vodafone executive and now the boss of United Arab Emirates-based Etisalat Group, in March following Mobile World Congress, an industry gathering.
During the meeting Mr Dowidar is understood to have given no indication that Etisalat, which had just undergone a restructure, was preparing a raid on Vodafone.
Etisalat’s decision to buy a 9.8pc stake in the FTSE giant for $4.4bn (£3.6bn) - a move that made it Vodafone’s biggest shareholder at a stroke - subsequently caught Mr Read and other board members by surprise when it was announced in Abu Dhabi on Saturday.
In a statement, Mr Dowidar insisted Etisalat was fully supportive of Vodafone’s strategy, did not want a board seat and had no intention of mounting a takeover.
But the shock swoop piled further pressure on Mr Read as he prepared to present his company’s annual results on Tuesday.
Since the chief executive took the reins in October 2018, Vodafone’s shares have fallen by nearly 30pc.
He is already under siege from other investors including Cevian, a European activist fund which revealed a stake in January and has been pushing Mr Read to simplify the business and shed under-performing divisions.
Cevian is also said to have pushed Vodafone to make progress with proposed takeovers in various markets. Vodafone is currently in talks with UK mobile rival Three about a potential merger.
Karen Egan, a telecoms expert at Enders Analysis, said Etisalat’s unexpected move came at “a crucial time” for Mr Read and the UAE company would not have swooped unless bosses believed “they can have a lot of influence”.
Paolo Pescatore, another telecoms analyst, said the investment in Vodafone had come “like a bolt from the blue”.
He said some would argue that it could be seen as a badly-needed endorsement of Mr Read’s strategy ahead of Tuesday’s results, but added: “That is going to contravene what other shareholders are saying.”
He said that Vodafone had been slow on the issue of convergence - combining fixed broadband services with a mobile offering - in some major markets such as the UK, leaving it flat-footed compared to rivals.
“That is what may ultimately come back to bite Read,” he added, “and a takeover of Three would by no means be a silver bullet, because it does not solve the fundamental issue that you need access to a fixed-line network.”
In a statement, Etisalat boss Mr Dowidar praised Vodafone as “one of the leading businesses at the heart of digital communications in Europe and Africa”.
He added: “Our investment represents a unique opportunity to acquire a significant stake in one of the leading and strongest global telecom brands, and a company that we know well.
“We are looking forward to building a mutually beneficial strategic partnership with Vodafone.”
Mr Dowidar previously worked under Mr Read as Vodafone’s managing director for Egypt from 2009 to 2014, when Mr Read was the company’s boss for Africa, the Middle East and Asia Pacific.
Both men then reported directly to Vittorio Colao, Vodafone’s former boss, from 2014 when Mr Read became group finance chief and Mr Dowidar was the group chief of staff.
Mr Dowidar left Vodafone and joined Etisalat in October 2015 and was appointed chief executive in May 2020. Mr Read became Vodafone’s group boss in October 2018.
It is thought their companies could collaborate in areas such as research and development and procurement in future, although that is yet to be confirmed.
Vodafone on Saturday noted the investment and said: “We look forward to building a long-term relationship with Etisalat.
“We continue to make good progress with our long-term strategic plans.”