ME telecoms firms must refocus growth plans - AT Kearney

Industry analysts say companies should rethink acquisition policy amid global crisis.

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By  Andy Sambidge Published  March 5, 2009

The rapid growth through acquisitions by telecoms groups in the Middle East and North African region (MENA) is set to slow amid the global economic downturn, analysts said on Thursday.

According to global strategic management consulting firm AT Kearney, growth for growth's sake will no longer be the "name of the game".

"During the past three to four years a number of leading regional telecommunications operators have exercised a strategy of intense expansion, mainly in the form of acquisitions," said Dr Karl Deutsch, head of AT Kearney's Middle East Telecom Practice.

"Most of these operators have enjoyed the growth in revenues so far, but have yet to reap the full potential for group synergies and operational excellence that these acquisitions pose."

Over the past few years leading operators, including Zain, Etisalat, Qtel, Orascom have expanded aggressively, primarily via acquisitions.

On a worldwide scale, Etisalat and STC are among the first MENA based companies approaching the global top 10 in terms of market capitalisation, yet more than 70 percent of their earnings before interest, taxes, depreciation and amortisation still stem from their home markets.

The company said its research showed only 29 percent of telecommunications groups had realised an increase in aggregate profitability when acquiring or merging entities.

Some even lost more than 47 percent in shareholder value as a result of expansion.

Tim Peters, principal, AT Kearney, Middle East added: "Top priority for CEOs and board members of telecommunications groups from the Middle East should be on how to extract maximum value and synergies from acquisitions in order to become a global top player in value terms.

Particularly during times of an economic crisis it is now even more urgent to shift from a pure growth focus to extracting maximum value, while expansion opportunities can still be eyed opportunistically."

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