by The Government has reached an agreement with Vodafone to address national security concerns related to a telecommunications group in the company which is backed by the United Arab Emirates.
The London-listed telecoms firm will now implement a number of “proportionate measures” to address concerns and allow it to put a director from investors on its board.
On Wednesday, Deputy Prime Minister Oliver Dowden used new powers to declare there were national security risks associated with Emirates Telecommunications Group, which does business as Etisalat at e&, which has a nearly 15% stake in Vodafone .
The UK is truly a magnet for global investment.
The Government approved the Strategic Relationship Agreement between Vodafone and e&. This is subject to proportionate measures under the INS Act.
There has been much interest and speculation about the decision. 👇 pic.twitter.com/cOaZNL35il
— Oliver Dowden (@OliverDowden) January 26, 2024
An order warned that his relationship with the British firm would “enable him to materially influence Vodafone’s policy” and ordered the establishment of a “national security committee” at the business to oversee and monitor any sensitive work .
The Cabinet Office confirmed on Friday that it has now approved a “strategic relationship agreement between Vodafone and e&”.
“Using the National Security and Investment Act he has implemented proportionate measures to address any national security concerns”, he said on Friday.
“Where an investment could affect the UK’s national security – for example through the acquisition of certain technologies or infrastructure – we will work with investment partners to reduce any risk.
“As part of our critical national infrastructure, telecommunications is one such sector. Vodafone is also an extremely important company for the UK Government because of its critical functions, including as a key partner in HMG’s cyber security strategy.”
A Vodafone spokesman said: “We are delighted to have received clearance in our home market for our strategic relationship agreement with e& and for e& to take a seat on our board.”
Abu Dhabi-listed e& has built a 14.6% stake in Vodafone, marking a deepening of a strategic tie that began in May 2022 when e& first invested in the FTSE 100 giant.
The British telephone firm announced in May that e&chief executive Hatem Dowidar would join Vodafone’s board as a non-executive director.
Earlier on Friday, the UK’s competition watchdog confirmed the proposed merger between Vodafone and fellow mobile network Three with a formal investigation.
The Competition and Markets Authority (CMA) said it had begun the formal investigation into whether the merger of the two firms into a single network provider could lead to a significant reduction in competition for mobile consumers.
The CMA said that if it found cause for concern during its initial examination, it could launch a more in-depth investigation into the merger.
The £15 billion merger was first announced last summer and would create the UK’s largest mobile phone network.
It was expected to attract scrutiny from regulators, particularly from a competition perspective, as it would reduce the UK’s main mobile network providers from four to three.
Unions also criticized the merger due to concerns about possible job cuts.
“This deal would bring together two of the major players in the UK telecoms market, which is vital for millions of everyday customers, businesses and the wider economy,” said CMA chief executive Sarah Cardell.
“The CMA will assess how this link between competing networks may affect competition before deciding on next steps.
“We now have 40 working days to complete this formal phase one investigation, before our findings and any next steps are published.”
In response to the CMA’s announcement, Vodafone UK chief executive Ahmed Essam said: “We have formally submitted our merger announcement to the CMA, having worked closely with them through the pre-announcement process. We look forward to continuing the constructive conversations now that the formal process has begun.
“We strongly believe that the proposed merger of Vodafone and Three will significantly enhance competition by creating a joint venture with greater resources to invest in infrastructure to better compete with the two largest converging players.
“Our commitment to invest £11 billion will build capacity to meet the exponential growth in data demand and accelerate the roll-out of advanced 5G across the UK, bringing benefits to consumers and businesses across the country.
Three UK chief executive Robert Finnegan said: “By combining networks, Three UK and Vodafone UK will unleash £11 billion of investment which will help the UK close the 5G gap with leading European countries and their ambitions to achieve being at the forefront of digital matters. connectivity.
“Thanks to this transaction, 95% of the population and all schools and hospitals will be covered by independent 5G by the end of the decade.
“Joining forces will have more immediate benefits. From day one, our customers will enjoy faster and more reliable coverage across more of the country – and without paying a penny extra.
“We are confident that this transaction will deliver significant benefits for our customers, the country and the competition, and we look forward to working closely with the CMA as they review our announcement.”
