Etisalat And Ooredoo Vie For Stake In Maroc Telecom

Middle East t elecoms giants Etisalat and Ooredoo submitted binding bids to buy French conglomerate Vivendi 's 53% stake in Maroc Telecom by the April 24 2013 deadline, according t o statements by companies. This signals the start of the final phase of the emergence of a new core investor in Morocco's incumbent telecoms operator , a development that could have significant implications for regional market dynamics.

International Units Sustain Growth
Maroc Telecom Revenue And Subscriber Growth (%), FY2012

At least five major international operators had expressed interest in Vivendi's stake in Maroc Telecom after it was first announced in October 2012. However, Saudi Arabia's STC, South Korea's KT Telecom and South Africa's MTN withdrew from the process, citing various strategic reasons. The submission of binding bids by Etisalat and Ooredoo confirms the battle for the Maroc Telecom stake is now a straight shoot-out between both operators.

Details of the bids by Etisalat and Ooredoo have not been disclosed. Although the stake has a current market value of around US$5.8bn, according to Reuters, we expect Etisalat and Ooredoo to have factored in considerable premiums in their bids. Etisalat and Ooredoo had raised around US$8bn and US$12bn respectively in debt to finance their bids. It is worth noting that the Moroccan government owns around 30% of Maroc Telecom and must approve any new core investor in the company. BMI expects this to add some element of politicking in the process, in addition to the financial bids. Local media reports had suggested the government might base its choice of a new investor based on some political and diplomatic factors.

BMI will closely monitor the selection of a winning bid for the stake in Maroc Telecom, considering the potential implications for regional competition dynamics. Maroc Telecom operates in four sub-Saharan Africa countries - Burkina Faso, Gabon, Mali and Mauritania - which are crucial to its long-term growth, amid increasing saturation and competition in its domestic market. As a result, we had argued that an investor with significant experience of the region's unique competitive landscape and macroeconomic environment would be a better fit for Maroc Telecom. We still maintain that view and believe Etisalat, which operates in more than five countries in Sub-Saharan Africa, is better placed than Ooredoo to integrate Maroc Telecom's international subsidiaries.

That said, there is a likelihood that Etisalat and Ooredoo would want to divest some, or all, of Maroc Telecom's Sub-Saharan Africa assets if either of them were to win the bid. There have been reports in the past that Etisalat may sell its smaller assets to concentrate on a few key markets, including the UAE, Saudi Arabia, Egypt and Nigeria. Ooredoo might also cite its limited experience in the region as a reason to divest the assets. Although we do not believe this would be a wise strategy, in view of the increasing contribution of the units to Maroc Telecom's financial and operational indicators, we expect such a move to attract regional giants MTN and Orange, which are open to acquisition opportunities in the region (see our online service, April 11 2013, 'MTN Open To New Acquisitions But Opportunities Are Few', and 'France Telecom Keen To Expand Emerging Markets Operations', January 14).

This article is tagged to:
Sector: Telecommunications
Geography: Morocco, Burkina Faso, Gabon, South Korea, Mali, Mauritania

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