Etisalat Eyes Greater Stake In High Growth Units
Etisalat has given its clearest indication that it may embark on another attempt at consolidation amid stagnation in some key financial indicators during the past two years. Etisalat's chief executive officer, Ahmad Julfar, quoted by Reuters, disclosed that the operator may raise its stake in existing operations in high-growth markets to boost its bottom line. BMI views this as a potentially beneficial strategy for Etisalat considering the declining revenue growth in its domestic market and limited opportunities for international expansion across the Middle East and North Africa.
Etisalat operates in 17 countries across the Middle East, Asia and Africa. However, in its recent quarterly results, the operator indentifies Saudi Arabia, Egypt and Nigeria as its best performing markets in terms of revenue and subscriber growth. However, Etisalat does not fully consolidate the earnings of Mobily (Saudi Arabia) and Etisalat Nigeria because of its minority shareholding in those companies. Etisalat owns a 27% stake in Mobily and a 40% stake in Etisalat Nigeria. These units, along with XL Axiata (Indonesia) and PTCL (Pakistan) are regarded as affiliates. In Q112, Etisalat's four affiliate units generated a combined net profit of AED288mn (US$78.4mn) after federal royalty applied in the UAE. Etisalat already owns a 66% stake in Etisalat Misr (Egypt) and is open about plans to increase its shareholding in the company, despite a requirement by the government for it to list up to 25% of the operator's shares on the Cairo bourse.
Although Saudi Arabia, Nigeria and Egypt have some of the largest populations among countries Etisalat operates in, BMI believes the operator is more interested in boosting its top line and bottom line figures, which have largely stagnated since 2010. These countries present significant revenue growth opportunities from data services, mainly because of rising disposable income, especially in Saudi Arabia, and a youthful population with a growing appetite for internet-based services such as social networking.
|Etisalat Revenue (LHS) And EBITDA (RHS) Growth|