By Patrick Werr and Alexander Cornwell
CAIRO/DUBAI (Reuters) - Saudi Telecom Co (STC), the kingdom's biggest telecom operator, has struck a preliminary deal to buy Vodafone Group's 55% stake in Vodafone Egypt for $2.4 billion, as it seeks growth in the Arab world's most populous nation.
With 44 million subscribers and a 40% market share, Vodafone Egypt is the country's biggest mobile operator.
The non-binding deal, which could be STC's biggest in over a decade, 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.
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 deal would be STC's biggest since it bought 35% of Oger Telecom for $2.6 billion in 2008.
The price equates to an enterprise value of 7 times core earnings, Vodafone said, a premium on the multiples of both joint-venture partners in the operator.
Vodafone trades at 6.1 times, while majority state-owned Telecom Egypt, which holds a near 45% stake in Vodafone Egypt, trades at 4.3 times, according to Refinitiv data. Telecom Egypt operates a separate mobile network under the brand "We".
Naeem Brokerage said the price offered by STC was "tempting enough for Telecom Egypt to also cash out ... our view, is that the company could be open to the idea of a sale."
At 1545 GMT, Telecom Egypt shares were up 10% at 11.22 Egyptian pounds. Vodafone Group shares were down 0.6% at 155.74 British pounds.
Telecom Egypt said on Wednesday it was closely monitoring the deal. The company said on Sunday it had no intention of selling its stake in Vodafone Egypt.
STC and Vodafone will soon begin due diligence expected to last up to three months, Vodafone Egypt executives said.
The agreement is subject to approvals by STC and Vodafone, and regulators. STC said no other parties were involved in the potential deal.
STC is majority owned by Saudi Arabia's state fund the Public Investment Fund (PIF).
Vodafone Egypt CEO Alexandre Froment-Curtil said that after the sale his company would have a commercial agreement giving it access to Vodafone Group's preferential roaming and other services such as its IoT (Internet of Things) platform.
Vodafone Group would also continue operating and expanding its 7,800-employee service centre in Egypt, he said at a news conference.
(additional reporting by Stephen Kalin, Ehab Farouk and Paul Sandle; Editing by Saeed Azhar and Mark Potter)