By Hadeel Al-Sayegh and Federico Macchioni

DUBAI, July 16 (Reuters) - E&P, the UAE's telecommunications and investment group, is scaling back much of its expansion strategy of the past few years, cementing its withdrawal from non-core businesses that accelerated with the sale of its stake in Vodafone this month for nearly $6 billion, two sources familiar with the matter said.

The company's agreement to sell its entire 16.2 percent stake in Vodafone to an investment entity owned by the French Niel family comes after the partial sale of its stake in the comprehensive app operated by Careem's ride-hailing platform to Uber last May.

The two sources, who asked not to be named because the plans are confidential, said the operations represent a shift in strategy under the group’s new chief executive, Masood Sharif Mahmood, who took over in April after his predecessor’s six-year tenure.

The sources said that under the new direction, E&P, which changed its name from Etisalat in 2022, is reviewing its investment portfolio, including its venture capital arm E&P Capital and its lending platform Beehive.

One of the sources added that the group intends to retain controlling stakes in the European company E&P Telecom Group and its telecom operators in emerging markets.

The two sources noted that the plans are still under discussion and no final decision has been made yet.

E&P and its largest shareholder, the Emirates Investment Authority, did not respond to requests for comment.

Previous expansion strategy

The two sources said that under former CEO Hatem Dowidar, E&P had been pursuing a strategy of using the cash surplus generated by its dominant position in the local telecommunications market to finance expansion in technology and investment in startups and international assets, with the aim of developing the group into a global technology company.

One of the sources said that the strategy did not yield the results that shareholders had hoped for, and the group ultimately concluded that its core communications business, where returns are more stable and easier to manage, should be the priority going forward.

The Emirates Investment Authority, the UAE’s federal sovereign wealth fund, owns 60 percent of E&P’s shares, while the remaining 40 percent is traded on the Abu Dhabi Securities Exchange.

Data from the London Stock Exchange Group shows that the group's stock, listed on the Abu Dhabi Stock Exchange, has fallen 8.6 percent over the past three years, bringing the company's market capitalization to around 176.9 billion dirhams ($48.2 billion). However, the stock has risen 4.3 percent over the past five days.

E&P said that total E&P Capital investments executed and committed amounted to approximately $194 million in 20 companies within its investment portfolio by the end of last year, adding that Beehive lent approximately $350 million to small and medium-sized enterprises in 2025, a 40 percent increase over the previous year.

Return to basic operations

Analysts from HSBC and Citi noted that the sales of Vodafone and Careem are signs of a broader shift towards core operations and balance sheet discipline, although they said the company has yet to announce a formal strategic review.

They said the Vodafone deal would significantly reduce E&P's debt by the end of 2026, potentially allowing the company to pay higher dividends. HSBC expects net debt to EBITDA to fall to around 0.5 times from 1.1 times.

Citi said in a note to clients on Friday that the sale of this stake also reduces earnings volatility caused by Vodafone's share price performance.

(US Dollar = 3.6725 UAE Dirhams)