Vodafone Group has struck a preliminary deal to sell its 55% stake in its Vodafone Egypt to Saudi Arabia’s largest telecoms operator, Saudi Telecom Company (STC), for $2.4 billion, the companies said on Wednesday.

The non-binding deal 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.

Vodafone Egypt is the leading operator in the north African country, with the largest market share.

The state-controlled telecommunications group said the non-binding memorandum of understanding would see both parties working on due diligence over the next 75 days. The final consideration would be determined on any definitive agreement, it said in a stock exchange statement. The prospective deal, which values Vodafone Egypt at $4.4 billion, comes as Riyadh-listed STC seeks to grow regionally. “The transaction, which is still subject to detailed due diligence, confirms STC’s eagerness to maintain a leadership position not only in the KSA, but also in the wider region,” said Nasser al-Nasser, chief executive.

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 binding agreement is subject to approvals by STC and Vodafone, and regulators. STC said no other parties were involved in the potential deal.

STC, also known as Saudi Telecom, is majority owned by Saudi Arabia’s state fund the Public Investment Fund (PIF).

Telecom Egypt, which also owns a stake in Vodafone Egypt, said on Wednesday it was closely monitoring the process “to study all available alternatives for it to handle its investments in Vodafone Egypt”.

The state-owned company said on Sunday it had no intention of selling its stake.

Meanwhile earlier this month the Vodafone’s broadband services joint venture (JV) with Hutchison Telecommunications (Australia) Limited has partnered with Nokia to roll out 5G services in Australia, the companies said.

The 5G drive comes as the joint venture is caught in a legal appeal process against an antitrust regulator’s move to block its proposed A$15 billion mega-merger with TPG Telecom.

In a joint statement, the companies said Vodafone Hutchison Australia, the 50-50 joint venture, would kick off its 5G rollout in the first half of 2020 with Nokia as the network vendor.

“They (Nokia) presented a compelling roadmap that aligned with our 5G objectives and will help us to continue improving our 4G network for our customers,” Vodafone Chief Executive Officer Iñaki Berroeta said in the statement.

The Finnish telecom network equipment maker has already built a test network to demonstrate its 5G technology, and those sites will become the first area of commercial coverage for Vodafone’s 5G network.

The partnership was the final step in a long process, Vodafone’s Berroeta said, following the security guidance given by the country’s federal government in August 2018.

Australia expanded its national security rules to exclude telecommunication equipment suppliers that it believes have ties to foreign governments, a move that disallowed Huawei Technologies Co from the country’s 5G rollout.

Saudi Telecom is majority-owned by the kingdom’s Public Investment Fund, which holds a 70 per cent stake in the firm, according to stock exchange data.

The company launched a new, unified brand identity in Saudi Arabia, Kuwait, Bahrain and its subsidiary companies in the last quarter of the year, which helped to boost the firm’s brand valuation, it said in a statement, contributing to its climb of annual Global 500 rankings by Brand Finance. It moved up to 242nd place, from 283rd a year earlier, with a brand value $7.1 billion.

Agencies