Appetite for growth

Etisalat's foreign investment credentials were boosted significantly last year when it successfully bid to operate arguably the most sort-after greenfield opportunity in the region - Saudi Arabia's second mobile operator.

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By  Tawanda Chihota Published  March 30, 2005

Appetite for growth|~|Etisalat-CEO-web-body.gif|~|Bin Mes'har, CEO of Etisalat International|~|The announcement of Etisalat's stellar financial results for 2004 was a good opportunity for the operator to announce what it proposes to do with its mounting war chest of free cash. Income for 2004 came in at AED10.43 billion (US $2.84 billion) while net profit grew 19% year on year to AED3.418 billion. The operator announced a 50% cash dividend and in the same breath reported the formation of Etisalat International, a business unit that would be headed by Obaid Saied Bin Mes'har. Etisalat's foreign investment credentials were boosted significantly last year when it successfully bid to operate arguably the most sort-after greenfield opportunity in the region - Saudi Arabia's second mobile operator. The privilege did not come cheap, with Etisalat having to fork out US $3 billion for the concession, which it expects to launch commercially before the end of June. Outside of Saudi Arabia, Etisalat holds a 40% stake in a consortium that last November was awarded a license to launch Sudan's second fixed-line network. The consortium, Kanartel, is set to come to market later in the year and Etisalat will manage, operate and maintain the network. The UAE operator also holds a 4.6% stake in Sudan's fixed line incumbent, Sudatel, which owns the country's monopoly mobile operator Mobitel. Etisalat owns a 34% stake in Zanzibar regional operator Zantel, which was last month authorised to extend its coverage and offer fixed and mobile services to mainland Tanzania. Etisalat also holds a 1% stake in its Qatari counterpart Qtel. “Etisalat International has been formed to look at any good opportunities to create value,” says Bin Mes'har, Etisalat International's incoming chief operating officer. “When you look at the penetration levels of the UAE market, it only makes good business sense to look outward for other opportunities,” he adds. The operator is not short on opportunities at this point in time given its involvement in a consortium that is ranked as one of the top six bidders short-listed for a controlling 55% stake in Turkish telco Turk Telecom. Turk Telecom owns a 40% stake in Turkey's third-largest cellular operator Avea and the winning bidder is scheduled to be announced at the end of May. Etisalat is also one of eight bidders to be short-listed for the award of a 26% stake in Pakistani telco Pakistan Telecommunications. The winning bidder will be offered management control of the telco despite the Pakistan government retaining a 62% equity stake in the company following the sale. Pakistan Telecom owns GSM operator Ufone, as well as Paknet, a countrywide ISP. "Turkey and Pakistan are both countries that we have expressed an interest in operating in," comments Bin Mes'har. “Our primary area of focus has been the Middle East and Africa, however, wherever there are potentially lucrative markets we will range further a field,” he adds. While a comprehensive business plan to guide Etisalat International's strategy is set to be completed in approximately two-months time, the company has given an early indication that it will continue to pursue a range of growth opportunities in the communications sector be they greenfield or established, fixed or mobile. “The answer to which type of investments we will pursue will depend on the individual opportunity, though I think the Saudi investment was an exception, as I expect that mostly we will be going the acquisition route,” Bin Mes'har explains. Some believe that Etisalat's confidence to aggressively pursue foreign investments is borne of its strong operational performance in its domestic market, where it is preparing to welcome the entrance of competition into the telecoms sector. “The TRA (telecoms regulatory authority) is working on draft licensing terms and I would expect to see some progress in licensing as early as the year end,” Ahmed Bin Byat, director general of Dubai Technology & Media Free Zone says. Given the establishment of a strong incumbent operator and the effects of globalisation, Bin Byat believes this is an opportune time for the liberalisation process to be taking place in the sheikdom. “The UAE (telecoms) market by nature is very competitive despite having only one operator. It relates to customers and suppliers in a competitive manner and Etisalat is supportive of the liberalisation process," Bin Byat says. Bin Byat also believes that Etisalat's supportive stance to the liberalisation process in the UAE stems in part from the operator's moves to strongly position itself as a regional player, and diversify its reliance on the domestic market. “Perhaps looking forward five or 10 years, the UAE market will only be one of many that Etisalat operates in,” Bin Byat comments. However, Etisalat International believes it is still too early to consider what position it will be in the medium-term. “It is premature to determine targets at this stage in the development of our business plan.” ||**||

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