Etisalat chases foreign deals

Etisalat continues to pursue overseas expansion despite the recent failure of its $12 billion takeover of Zain and pulling out of a bid for Syria's third mobile license.

Analysts predict Etisalat's operations outside the UAE will continue to grow despite setbacks.

Etisalat continues to pursue expansion overseas in Asia and Africa, despite the recent failure of its US$12 billion (Dh44.07bn) takeover of its Kuwaiti rival Zain and its decision to pull out of a bid for Syria's third mobile licence.

Potential new markets for Etisalat include Iraq, Lebanon and mobile services for Sudan, where it already has landline operations.

Analysts predict the company's operations outside the UAE will continue to grow, with one forecasting the proportion of its revenues from abroad will increase to 30 per cent by 2015, up from 23 per cent last year.

Such projections come despite the failure of the Zain bid, which would have given Etisalat access to markets such as Iraq, Morocco, Jordan, Kuwait and Bahrain.

Ahmed bin Ali, the group senior vice president of corporate communications at Etisalat, said the group was still seeking expansion overseas.

"We have expressed our interest in several markets within the Middle East, and we are studying some markets and monitoring the development of telecom-related issues in some others," Mr bin Ali said.

"We continuously seek and evaluate opportunities as soon as they arise. Our main focus at this stage remains on markets in Asia and Africa."

But viable acquisition targets and new mobile licences are thin on the ground, said Irfan Ellam, a telecommunications analyst with Al Mal Capital.

Mr Ellam said Iraq and Lebanon look to be the only viable new markets for Etisalat in the Middle East, while the group "would like to get a mobile licence in Sudan", where it already has a cable network.

"The overseas operations are growing," he said. "Over the short term, they'll become more important. Revenues from outside the UAE could be up to 30 per cent by 2015. And that could prove conservative.

"Could revenues from outside the UAE overtake those in its domestic market? Eventually, yes. But we'd be talking over six years down the line. It could happen earlier if Etisalat found new acquisition targets."

Mr bin Ali said Etisalat was "targeting a significant proportion of our future growth to result from the addition of new subscribers in these emerging markets".

The company has been named as a potential bidder for the fourth mobile telecoms licence in Iraq, which is expected to bring in about $2bn for the authorities there.

This is the most likely route into the country for Etisalat, said Mr Ellam, who added that the existing operators Qatar Telecom (Qtel) and Zain were unlikely to sell.

"In Iraq, the only option is the fourth licence," he said. "I don't think Qtel is going to sell their Iraq operation and I don't see Zain selling either."

Iraq's low mobile penetration rate of about 70 per cent presents an opportunity for growth, Mr Ellam said.

But other analysts said the expected new licences in Iraq and Lebanon had been slow to emerge, and were of uncertain profitability.

"Iraq has been talking for a while about the fourth licence," said Simon Simonian, a telecoms analyst at Shuaa Capital. "I'm not sure the fourth licence is as attractive as being number one or number two."

Mr Simonian said he was "not aware of any other new markets that Etisalat may be pursuing actively". But he said the company was expected to expand its overseas portfolio in the future.

"We'd like to see them make the right move at the right time," Mr Simonian said. "This company has a strong portfolio.

"Opportunities will come and they are in a good position to make a move compared to others, given their strong balance sheet."