GCC telecom operators target European growth through investments

Telecom operators in the Gulf Cooperation Council (GCC) are turning to mergers and acquisitions (M&A) as a strategy to expand their businesses and geographic presence, according to a report from S&P Global.

The focus is on stable European markets, which offer lower currency risks compared to high-growth but volatile regions.

Although valuations are attractive—GCC telecom companies have an average forward EV/EBITDA multiple of 6x, compared to 5x for European peers—GCC operators are unlikely to seek majority ownership due to local political and strategic interests in target companies.

The report suggests that these investments will have a limited impact on credit ratings, though the debt-funded nature of the transactions could reduce rating headroom.

Recent GCC Telecom Expansions

S&P Global reports that key players such as UAE-based e& and Saudi Telecom Company (stc) have been active in international markets.

• e& Acquisitions: In 2024, e& acquired a controlling stake in PPF Telecom Group for €2.36 billion, consolidating operations across Bulgaria, Hungary, Serbia, and Slovakia. The company also increased its stake in Vodafone to 15.01%, making it the largest shareholder.
• stc Investments: stc received approval to raise its stake in Spain’s Telefónica to 9.97%, securing a board seat and gaining influence over strategy.

Driving Factors Behind European Expansion

• Revenue Diversification: With saturated domestic markets and over 100% mobile penetration, GCC operators are seeking growth abroad. European markets, while slow-growing, provide stability and opportunities for cash flow growth as capital expenditure needs decline.
• Currency Hedging: Investments in Europe help mitigate exposure to currency volatility in regions like Egypt and Pakistan. The euro’s relative stability serves as a financial hedge for GCC telecom operators.

Financial Impact

The investments are primarily financial or equity-based with limited operational integration, which means that credit ratings for GCC telecom companies remain stable. S&P Global notes that while e&’s acquisition of PPF Telecom adds 15% to 20% to its revenue and EBITDA, the impact on its business profile is minimal.

Domestic markets continue to generate the primary source of cash flow due to favorable demographics and competitive dynamics.

However, sustained investments could affect credit ratings if they alter the companies' financial risk profiles.

For international targets, credit upgrades depend on operational control, strategic alignment with parent companies, or explicit financial support.

Focusing on Data Centers

Domestically, GCC telecom companies are increasingly investing in high-growth sectors like data centers. Stc and Ooredoo have each announced $1 billion investments in data center expansions to meet the growing demand for cloud services and artificial intelligence.

As GCC telecom operators continue their international expansion, their focus on stable European markets reflects a strategy to balance growth with risk mitigation, strengthening their positions as global telecom leaders.