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Etisalat waiting for M & A over next 18 mths

DUBAI - Middle East telecom operator Etisalat expects a shakeout in the sector to throw up takeover opportunities in the next 18 months and wants to be ready, keeping its war chest replete.

“Today a telecom company with deep pockets is much better than one with huge debts,” chief executive Ahmad Julfar told Reuters in an interview by phone on Wednesday.

Asked whether Etisalat was mulling a bid for Vivendi’s Maroc Telecom, he said: “We are not part of that yet.”

Vivendi has asked bankers to hold talks with potential buyers of its 53 percent holding in Maroc Telecom, which has a market value of 4.35 billion euros ($5.64 billion). The French media-to-telecom conglomerate is seeking to sell assets to cut debt and boost its flagging shares.

Etisalat and regional rival Qatar Telecom have been cited as possible bidders, and no deadline for bids has been set.

“Telecoms is a very capex intensive business. It is a long-term investment and sustainability is crucial to us so we have to look at how to best invest our money. The crisis in the market will provide M&A opportunities over the next 18 months. We would like to be ready when those opportunities are there.”

A bid for Maroc Telecom would represent a major undertaking for Etisalat, which has a net cash balance of 7.2 billion dirhams ($2.0 billion).

Etisalat operates in 15 countries across the Middle East, Africa and Asia after a multi-billion dollar splurge buying foreign licences and stakes over the past decade, which has yet to provide the expected returns.

Last year, it scrapped a plan to buy a $12 billion stake in Kuwaiti telco Zain.

On Tuesday, Etisalat posted a third-quarter profit of 2.21 billion dirhams, up 28 percent.

This gain was largely due to a net profit of 430 million dirhams selling a 9.1 percent stake in Indonesian group PT XL Axiata that cut Etisalat’s holding to 4.2 percent.

“In the past we used to be strategic partner, today we are only an investor in the company,” said Julfar, adding Etisalat would assess whether to sell its remaining stake by year-end.

International revenue rose 7 percent in third-quarter, accounting for 30 percent of group revenue, which was flat.

That implied domestic earnings fell despite Etisalat’s mobile subscriber base increasing 11 percent, with conventional call revenue under pressure from alternative, internet-based communications.

That trend has prompted Etisalat to diversify, ramping up other services such mobile money, machine-to-machine communications and cloud computing.

“Although the revenue from this, at the beginning, will be low, it is to position Etisalat as a leading innovative company in the region,” Julfar said.

“We have to put the world into a mobile phone. So your mobile phone will be your phone, your laptop, your gadget to do mobile health, mobile education ... to do video-to-video calls.”

Etisalat recently launched 3G services in Afghanistan and will soon do likewise in Ivory Coast. “We have 3G services in all the other markets expect Pakistan so we will see huge growth coming from mobile data,” Julfar said.