Etisalat Mulls Foreign Ownership
Emirates Telecommunications Corporation (Etisalat) may widen ownership of its share capital to include foreign investors within the next two years. BMI believes that the move, which requires the approval of the UAE government, the rewriting of the country's telecommunications and business laws and a significant alteration to the company's licences and corporate structure, would significantly improve liquidity and transparency for Etisalat. The company still harbours ambitious overseas investment plans, despite having recently said that major acquisitions are not part of its short- to medium-term strategy.
According to Al-Khaleej newspaper Etisalat CEO, Ahmad Abdulkarim Julfar, said the Emirates Investment Council is working to amend the laws governing foreign ownership of the company. As Etisalat is 60% state-owned and a major contributor to government coffers, as well as the local economy, BMI expects that any relaxation of the foreign ownership laws will be gradual. The state will ensure it retains control of the company either through continued majority share ownership or through a 'golden share', that would give it the power to veto key management decisions.
As one of the largest businesses in the Middle East and with operations in North Africa, Sub-Saharan Africa and Asia, Etisalat can no longer rely on state support, the local bourse and regional financial institutions to underwrite its long-term business strategy. As the accompanying chart shows, quarterly revenue averaged at over AED8bn of late, while EBITDA remains around AED4.1bn. This has yielded an impressive EBITDA margin of around 50%. However, mounting costs relating to its troubled Indian operation, as well as relatively low revenue growth in its African business, mean that its current strategy is not sustainable in the long term.
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