Etisalat giving foreigners too much power?

Etisalat giving foreigners too much power?

Is allowing foreign investors into Etisalat a good idea? Let's wait and find out what the UAE government has to say about it

August 2, 2012 3:15 by M. Aldalou

The Emirates Telecommunications Corporation, also known more famously as Etisalat, saw a higher spike in its shares that closed at Dh9.35 after the UAE giant made a hopeful announcement about allowing foreign investors to buy stakes.

The telecom giant, as well as stock market and financial analysts, have attributed this spike to said announcement and the general market pattern, which also received positive hikes within the stock market, financial institutions and leading banks in the capital.

Etisalat’s CEO has declared that the initial plans have been finalized and all that is left is the government’s approval.

While this news of the state (partially) owned Etisalat has turned several necks, it appears that the cringe may not last, as the unanimous reaction appears to be positive. However, one of the sticking questions does not revolve around its positive outcomes but rather over the government’s willingness to adopt the strategy. The final say and decision, still lies with the UAE government.

Sixty percent of Etisalat is owned, backed and controlled by the UAE government and so the company pays an annual royalty, after which, they can calculate their net profits. According to the Abu Dhabi Stock Exchange, there are 14 other listed companies that are not allowed to allocate any stake for foreign investment. Something must make Etisalat different, if they hope to get the thumbs up that is.

According to Ahmad Abdulkarim Julfar, CEO of Etisalat, the governmental body will have the final say but he remains optimistic of the UAE appealing to the positive aspects of the argument. How soon the talks will take place and what share will be allocated for public purchase has not been indicated or revealed. Julfar does however reveal that it will take place “soon”. He has strongly indicated that allowing foreign investors onto the playing field will definitely result in a more competitive business market and industry. However, that opinion is not unanimous among economic analysts.

“I think allowing foreign ownership of Emirati stocks is a step in the right direction in order to level the playing field for all investors but I’m failing to see how it will promote ‘a more competitive business environment’,” said Petr Molik, the head of the research division at Mena Corp to Khaleej Times.

The size of the allotted stake could also prove to be a turning point for the company’s managerial and financial future but until those figures are released, analysts may not have a perfectly clear vision of the future.

The remaining privately owned section of the company trades on the Abu Dhabi Financial Market and so the news of potentially allowing foreign investors has represented strength for local stakeholders as well as resulted in a boost of confidence.

Despite the promises of financial growth, widening of networks, investor relations and other aspects that go along with expanding one’s parameters of investment, the UAE government may find it disadvantageous, as they would be losing some of its control over the telecom giant. Could that be a path that they are ready to take?

Etisalat currently operates in 18 countries across Asia, the Middle East and Africa and so the corporate management has obtained an adequate amount of global knowledge and telecom industry. Now, as far as the UAE government’s decision goes, we play the waiting game.

Photo Source: Etisalatfm.com