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* Vodafone to sell 55% stake in Vodafone Egypt
* Shares in partner Telecom Egypt jump 10%
* Would be STC's biggest deal in more than a decade
(Adds comments from executive,)
By Patrick Werr and Alexander Cornwell
CAIRO/DUBAI, Jan 29 (Reuters) - Saudi Telecom Co (STC)
, the kingdom's biggest telecom operator, has struck a
preliminary deal to buy Vodafone Group's 55% stake in
Vodafone Egypt for $2.4 billion, as it seeks growth in the Arab
world's most populous nation.
With 44 million subscribers and a 40% market share, Vodafone
Egypt is the country's biggest mobile operator.
The non-binding deal, which could be STC's biggest in over a
decade, values Vodafone Egypt at $4.4 billion and the two
companies have agreed an arrangement over the long-term use of
the Vodafone brand and other services in Egypt.
Selling the stake is in line with Vodafone's efforts to
streamline its operations to focus on Europe and sub-Saharan
Africa, Vodafone Chief Executive Nick Read said.
"It will reduce our net debt and unlock value for our
shareholders," he said.
Vodafone said the transaction was expected to close by June.
STC said the non-binding agreement was valid for 75 days from
Wednesday and could be extended by mutual consent.
"Vodafone Egypt is the leading player in the Egyptian mobile
market and we look forward to contributing further to its
continuing success," said STC Chief Executive Nasser al-Nasser.
The deal would be STC's biggest since it bought 35% of Oger
Telecom for $2.6 billion in 2008.
The price equates to an enterprise value of 7 times core
earnings, Vodafone said, a premium on the multiples of both
joint-venture partners in the operator.
Vodafone trades at 6.1 times, while majority state-owned
Telecom Egypt, which holds a near 45% stake in
Vodafone Egypt, trades at 4.3 times, according to Refinitiv
data. Telecom Egypt operates a separate mobile network under the
brand "We".
Naeem Brokerage said the price offered by STC was "tempting
enough for Telecom Egypt to also cash out ... our view, is that
the company could be open to the idea of a sale."
At 1545 GMT, Telecom Egypt shares were up 10% at 11.22
Egyptian pounds. Vodafone Group shares were down 0.6% at 155.74
British pounds.
Telecom Egypt said on Wednesday it was closely monitoring
the deal. The company said on Sunday it had no intention of
selling its stake in Vodafone Egypt.
STC and Vodafone will soon begin due diligence expected to
last up to three months, Vodafone Egypt executives said.
The agreement is subject to approvals by STC and Vodafone,
and regulators. STC said no other parties were involved in the
potential deal.
STC is majority owned by Saudi Arabia's state fund the
Public Investment Fund (PIF).
Vodafone Egypt CEO Alexandre Froment-Curtil said that after
the sale his company would have a commercial agreement giving it
access to Vodafone Group's preferential roaming and other
services such as its IoT (Internet of Things) platform.
Vodafone Group would also continue operating and expanding
its 7,800-employee service centre in Egypt, he said at a news
conference.
(additional reporting by Stephen Kalin, Ehab Farouk and Paul
Sandle; Editing by Saeed Azhar and Mark Potter)
