Vodafone shareholder e& to consider joint investments

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The mark hangs outside a Vodafone store in Oxford, Britain May 16, 2017. REUTERS/Toby Melville

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DUBAI, May 20 (Reuters) – United Arab Emirates telecommunications group e& (ETISALAT.AD) said on Friday it would consider joint investments with Vodafone (VOD.L) after buying a 9.8% stake in the British company last week, and is looking to cooperate on purchasing as well as research and development.

Hatem Dowidar, chief executive of the company formerly known as Etisalat, said he was confident in Vodafone’s strategy, including streamlining operations and consolidating in Europe.

“I think they’re clear on what needs to be done and they’re trying to do it,” Dowidar said in an interview when asked if Vodafone should move more aggressively on acquisitions.

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“The channel will be open if there is an investment where our participation as a partner makes sense to us,” he said of potential co-investments.

Dowidar said e& bought the stake because it viewed Vodafone as undervalued and dividend yields were higher than the cost of debt backing the deal, adding there were no plans to increase participation “for the time being” and that e& would remain a passive investor.

The $4.4 billion purchase was financed using a $7 billion one-year revolving credit facility partially drawn from a consortium of banks, Dowidar told Reuters, declining to name the lenders.

The two companies will cooperate on research and development such as the open radio access network, as well as procurement, including standard parts, which would reduce costs, Dowidar said, adding that joint ventures would also be considered.

Dowidar said e& is looking at more opportunities in telecommunications and plans to make small venture capital investments.

“If we find opportunities similar to Vodafone, companies that generate good dividends, that can have synergies with us… we will look at them,” he added.

It also plans to finalize its offer to increase its stake in Saudi Mobily to 50% by the end of the third quarter.

While e& does not currently plan to raise more debt this year, it will consider issuing bonds when markets stabilize.

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Reporting by Yousef Saba; Editing by Alexander Smith

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