UK Raises Concerns Over Emirates-Backed Stake in Vodafone, Citing National Security Risk

The UK government has identified national security concerns over the United Arab Emirates firm e&'s increased shareholding in Vodafone.

The Cabinet Office warned that e&, which holds a 14.6% stake, could pose a risk due to Vodafone’s pivotal role in UK telecoms.

To counter potential risks, the UK has called for a national security committee within Vodafone. Following e&’s expansion of its Vodafone stake from an initial £3bn to 14.6%, and the appointment of e&'s CEO Hatem Dowidar to Vodafone's board, scrutiny under the National Security and Investment Act 2021 was initiated.

The government has implemented orders, including clear notification of any changes in the partnership and that Vodafone meets specific conditions regarding its board.

Under the strategic partnership, e& has the potential to increase its holding to just below 25% and appoint an additional board member if its shares exceed 20%. The state-owned e& insists on a supportive, non-controlling interest in Vodafone.

Vodafone has acknowledged the approval of its strategic relationship with e& and subsequent board inclusion. Other UAE-based investments in the UK media are also under review, such as the proposed deal between the Barclay family and RedBird IMI over the Telegraph and Spectator.

New concerns have arisen due to corporate restructuring by RedBird, leading UK regulators to potentially reassess the transaction.

Separately, Vodafone’s proposed £15bn merger with Three is under regulatory investigation by the CMA, which could impact consumer prices and choice, with warnings that the merger might increase annual phone bills.