Etisalat eyeing South Africa's MTN

UAE telecom evaluating possible bid for Africa's largest mobile phone operator, chairman says.

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By  Wael Gamal and Jennifer Tan Published  May 12, 2008

UAE telecom Etisalat said on Monday it is evaluating a possible bid for South Africa's MTN, which is also a potential target of India's top mobile operator.

Etisalat Chairman Mohammed Omran said his company was looking at MTN, Africa's largest mobile phone operator, and hopes to boost revenue from the continent to at least a quarter of total revenue within four years. "We are always looking for expansion in Africa," Omran told reporters at a telecoms conference in Cairo. "We are evaluating MTN, among other companies."

He did not give further details about how Etisalat - whose market capitalisation of $35 billion is below MTN's - would approach a tie-up. India's Bharti Airtel and MTN have said they are in talks that may or may not lead to a deal, and a source familiar with the situation told newswire Reuters on Monday that Singapore Telecommunications is actively involved in the talks.

Omran's comments supported South Africa's rand currency which rose as much as 1.3% on Monday, even as analysts warned that a deal to buy a stake in MTN would not be straightforward and likely involve the government. MTN shares closed 3.72% higher at 159 rand ($20.75). The stock has gained 19.5% since April 24, when first reports emerged that Bharti Airtel was interested in the company.

MTN, with a market value of around $39 billion and with 68.2 million subscribers in 21 countries in Africa and the Middle East, has long been the target of takeover speculation as mobile phone companies seek to expand in Africa. Media reports have said Bharti is eyeing a stake of 51% at a value of around $19 billion, which would create the world's sixth-largest mobile company with 130 million subscribers in more than 20 countries.

MTN is one of South Africa's most successful black-managed companies and some analysts questioned whether South Africa's government, which is encouraging more black ownership of the economy, will allow one of the jewels of corporate South Africa to fall into foreign hands. "The government probably have to be consulted on any change in ownership that may occur," said Rajay Ambekar, a porfolio manager at Cadiz African Harvest.

Ambekar said altough there was no legal ground for the government to prevent anyone from buying MTN, it does have some say as the investment fund manager for civil servants, the Public Investment Corporation, holds 13.09% of MTN. Currency traders said bid speculation - with the resulting big inflow of money - were helping support the rand currency.

"At the moment it is just speculation but the fact that Etisalat might be interested is positive for the rand," Bidvest Bank trader Ion de Vleeschauwer said. "It [a buyout] would result in a significant inflow and will also boost sentiment. The message is that companies are still interested in the region."

Government-controlled Etisalat, which operates in 16 countries and has 51 million customers, has been on a four-year, $5 billion spending spree, setting up mobile operators in Egypt and Saudi Arabia as well as buying a stake in a Pakistani unit. Omran said the company's African operations were fast growing. It expects to add four million customers in West Africa over the next one and a half years to the current 2 million.

"I see within three to four years that revenue from Africa will be not less than 25%," Omran said, referring to the share of group revenue. Shares of Etisalat closed 0.23% higher at 21.40 dirhams ($5.83).

The Asian Wall Street Journal, quoting an unidentified source, said on Monday that Bharti was considering raising its offer to around 175 South African rand ($22.84) a share for control of MTN. It said an official bid could come this week. China Mobile, the world's biggest mobile carrier, has said it is interested in the South Africa market, but has not bid for MTN.

Britain's Vodafone Group said on Sunday it has no intention of pursuing a bid for MTN. It was responding to media reports that it was considering buying part or all of MTN. (Reuters)

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