M&A WATCH- Could Telecom Egypt sell its stake in Vodafone Egypt? Telecom Egypt (TE) is more likely to offload its 45% stake in Vodafone Egypt than it is to call on its right of first refusal to bid for Vodafone Group's 55% holding, say analysts and experts speaking to Reuters and the local press. Saudi Telecom Company (STC) signed last week a non-binding agreement to acquire the 55% stake for USD 2.39 bn, pricing the entire business at USD 4.4 bn. Vodafone said it expects the transaction to close in June of this year, pending the green light from regulators.

TE would be better off selling: The state-owned company’s debt burden currently stands at EGP 15 bn, meaning it lacks the liquidity to finance the purchase of Vodafone Group’s 55%, Pharos Holdings’ Radwa Elswaify and Shuaa Securities’ head of research Amr Elalfy tell Reuters. Offloading its stake would help the company finance its operations, but the question is whether STC would buy it. TE had said that it will “consider all the possible ways” to handle its investment in the company, and that it will make a decision after Vodafone and STC reach a final agreement.

On the other hand, buying the rest of Vodafone Egypt would make TE the country’s top mobile network operator and would give its own network, We, a chance to survive, former National Telecommunications Regulatory Authority (NTRA) head Hesham El Alaily says.

But the state-owned company has so far expressed no intention of buying. Vodafone Egypt CEO Alexandre Froment-Curtil told us last week that STC’s buyout offer was unsolicited, and TE had earlier said that it had no intention of exiting Vodafone Egypt. TE said after the STC announcement that it would “consider all the possible ways” (pdf) to handle its investment in VFE once Vodafone Group and STC wrap up their transaction.

The government is looking at the possibility of requiring STC to make a mandatory tender offer for 100% of Vodafone Egypt’s shares, an unnamed analyst at an investment bank told Reuters. This would only be legally possible if Vodafone Egypt is treated as a listed company, even though it delisted in 2006.

TE shares have soared since the STC announcement, rising 12.48% on Sunday to EGP 13.80, according to EGX data. Analysts told the local press they see the company's stock reaching EGP 18.