|Wednesday, May 22, 2013|
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AFRICA TELECOMS TODAYAcquisition Spree
09/30/09, Biodun Omojola
Etisalat is set to gobble up up more telecom companies this year in a buying binge.
It appears that UAE-based Emirates Telecommunications Corporation (Etisalat) is on a roll regarding acquisitions of telecom companies this year. On its acquisition radar are three prospects: 51 percent of rival operator Zain Group, a new licence in Libya and 32 percent stake in Meditel, Morocco's second-largest telecoms firm. Outside Africa, Etisalat is reportedly considering investing in Sri Lanka. That country has just ended a bitter civil war. Officials from the company have visited the country meeting stakeholders including officials of Sri Lanka's Telecommunications Regulatory Commission (TRC). Regarding Zain and Meditel, Etisalat has not made offers yet but there are indications that Etisalat's interest in both companies is more than just a passing interest. For Libya though it is willing to invest at least $500 million if it wins the tender for a telecom licence in that country.
Meditel is on the market because Portugal Telecom, owner of a third of the company, is selling its stake. It has appointed leading financial house, Morgan Stanley, to coordinate the sale. Etisalat's chief financial officer Salem Ali al-Sharhan in confirming its Moroccan interest, said "We are still looking at Morocco," but also hinted that acquiring Meditel might not "materialize". Just as with Meditel, there is also a hint of double speak in the Zain prospect. Jamal al Jarwan, Etisalat's head of international investment, says "We are interested in Zain as a whole, given the right values," but he quickly adds that it has not commenced discussions with Zain over such a deal. The clarification comes against the background that Zain is looking for a buyer for its African operations.
Etisalat's prospective acquisitions are in tandem with its "careful expansion strategy" which involves seeking acquisitions in the Middle East and Africa because of decline in asset prices and available cash. Etisalat revealed, last November, that it had more than $3 billion in cash to fund purchases in 2009. The company hopes growth in revenues would help it expand and develop national and international business units. Senior officials of Etisalat say Libya is strategic to the company and that is why it is willing to invest half a billion dollars in the north African country. According to Jarwan, "We would need a new network and it will not be less than $500 million. That's the minimum to get started." Although how much it bided for the licence is not known, analysts say Etisalat's dream of expanding in Africa will see it make an amazing offer to the Libyan telecom authority.
Etisalat is very keen to expand overseas, especially in Africa, as it faces declining market in its home market of UAE. That country is full of expatriates and foreign workers - the country is one huge foreign labour center - and the international financial crisis is already having an adverse effect it especially in the construction sector with job losses reported monthly. The job cuts in almost all sector of the UAE economy has seen a gradual drop in expatriate population thereby affecting markets and profits of Etisalat. Its second-quarter net profit fell 19 percent compared to the same period last year. The breakout to Africa is aimed at boosting profit.
Libya is not Etisalat's first African market. Egypt is and the company had a wonderful run there. In that north African country, it gave existing operators a run for their money in just over two years of operations. Mobile penetration level in Egypt rose from 39.82 percent in December 2007 to approximately 60 percent in June 2009. It is also in Nigeria, Africa's biggest telecom market, where its subscriber base has reached the one million mark in less than one year of operations. It has been building on its Egyptian experience in other African markets with success. Says Khaled Akl, head of research at Abu Dhabi Commercial Bank: "Etisalat believes Africa is a growth market due to lower market penetration levels in comparison to developed markets."
However, Etisalat is not the only company interested in the Libya licence. The UAE firm will compete against Turkey's biggest mobile operator, Turkcell. Libya with a population five million is serviced by two state-run mobile phone operators, Libyana and Madar. It is the latest north African state to end its long-standing opposition to private investment in the lucrative telecoms sector. Government officials had repeatedly said they don't need foreign private-sector involvement in Libya's telecom sector. Globally and in particular on the African continent, governments are, however, increasingly turning to private investment to help develop their telecom industry.
Etisalat has a huge pedigree in the global telecom industry. Globally, its customer base is in excess of 85 million. This is expected to balloon to 100 million subscribers by 2010. The company is also the Gulf's second largest telecommunication's firm by market value. For 2009, it made a second quarter net profit of 2.41 billion dirhams ($656.1 million), down 19 percent from a year ago but, none-the-less, the result exceeded forecasts. Winning the Libya licence and clinching 32 percent of Morocco's Meditel is a step towards achieving its 100 million subscriber base by 2010.
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