Etisalat planning a network boost

Etisalat planning a network boost

Selling assets that have failed to add much to the bottom line will narrow Etisalat's focus and aid attempts to reclaim some of domestic rival du's 46.5 percent market share in the UAE.

September 20, 2012 5:09 by Reuters

Etisalat will use the proceeds from a $510 million stake sale in Indonesia to boost networks in core markets, the Gulf’s No. 2 telecoms operator said on Thursday.

The company, which has interests spanning Africa, Asia and the Middle East, sold a 9.1 percent stake in Indonesian mobile firm PT XL Axiata last week, retaining a 4.2 percent holding.

“Proceeds will be used to fund further growth in next generation networks in our core growth markets and roll out additional services,” Etisalat said in a statement emailed in response to questions from Reuters.

The company did not say which countries it considered “core”, but they likely included the United Arab Emirates – source of about 71 percent of revenues in the second quarter – and the lucrative markets ofSaudi Arabia, Egypt and Nigeria.

The Indonesian sale, which followed an exit from India, was seen as part of a broader push to trim back on underperforming units.

Etisalat’s new management team – it has installed a new chairman, chief executive and heads of finance, strategy and marketing in the past 18 months – has said more divisions could be sold following a sustained profit drop.

Analysts have named African subsidiary Atlantique Telecom as one possible sale candidate.

“Atlantique operates in small markets with multiple players, so it is not particularly attractive, but Etisalatcould find a buyer if it sells Atlantique as a whole,” said Petr Molik, chief financial officer at MENACORP inAbu Dhabi.

“Etisalat isn’t under any pressure to sell assets quickly – it has a strong cash position, so its units won’t be offloaded at fire-sale prices.”

Selling assets that have failed to add much to the bottom line will narrow Etisalat’s focus and aid attempts to reclaim some of domestic rival du’s 46.5 percent market share in the UAE.

“Du was not expected to win such a share so easily and so quickly - Etisalat will find it difficult to maintain domestic margins if it tries to be aggressive against du,” added Molik.

“The focus is now on the UAE, but Etisalat won’t retreat entirely.”

Etisalat and affiliate Mobily have already launched long-term evolution, or LTE, next-generation networks in the UAE and Saudi Arabia, but LTE-enabled smart phones are in their infancy and take-up has been slow.

By the end of June there were 12,500 LTE subscriptions in Saudi Arabia and 9,500 in the UAE, Informa Telecoms and Media estimates.

Egypt has yet to issue LTE licences, but Etisalat and rival Vodafone Egypt have launched trials, Informa said.