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Balancing Act: Vodafone and e& Navigate National Security Implications

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The UK government and Vodafone have found common ground in instituting “proportionate measures” regarding the holdings of UAE-based e& in Vodafone. This decision follows the government’s vocal concerns over possible national security risks due to e&’s significant stake in the UK operator.

e&, formerly known as Etisalat and 60% owned by the Emirati government, has been steadily increasing its ownsership in Vodafone over a few years, hitting a substantial 14.6% in April 2023. This made e& the largest shareholder in Vodafone, and awarded e&’s CEO, Hatem Dowidar, a seat on Vodafone’s board.

The appointment triggered immediate attention from UK government. The cabinet office issued a warning that this move could potentially allow e& to assert considerable influence over Vodafone’s policies. Given Vodafone’s integral role in the UK telecommunications sector, the government has necessitated the establishment of a “national security committee” within Vodafone. The purpose of this committee is to closely scrutinize any work that may have implications for the UK’s national security.

The government has clarified that these steps are pertinent and proportionate to “mitigate the risk to national security”. In addition, the UK government demands transparency in case the relationship between e& and Vodafone undergoes any significant changes.

In light of these events, the government has invoked section 26 of the National Security and Investments Act, designed to address similar nationwide security concerns. “Where investment might impact the UK’s national security – for example through the acquisition of certain technologies or infrastructure – we will work with investment partners to minimise any risk,” noted Oliver Dowden, the Deputy Prime Minister. He emphasized on the importance of the telecom sector and Vodafone’s role in the UK’s cyber security strategy.

Following these remarks, the Cabinet Office confirmed that Vodafone has agreed to “proportionate measures to address any potential national security concerns”, although the specifics of these measures remain under wraps. “We are pleased 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,” Vodafone commented in a brief statement.

The saga unfolds as the telecommunications industry keenly observes developments that can potentially impact the prevailing dynamics.

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