Etisalat said yesterday it had entered into exclusive talks to acquire a controlling stake in Maroc Telecom as the UAE phone company reported a 50 per cent leap in international earnings.
It has been granted a period of exclusivity by the French conglomerate Vivendi for the acquisition of its 53 per cent stake in Maroc Telecom, Etisalat said in a filing.
The binding offer is valued at Dh18.8 billion, or Dh92.6 per share, and the period of exclusivity runs until September 25.
Etisalat will also pay Vivendi Dh1.5bn for 2012 dividends that the French firm was set to receive from Maroc, Morocco's largest telecoms company. The acquisition is subject to approval from the Moroccan government, which owns a 30 per cent stake in Maroc Telecom, if Vivendi accepts Etisalat's offer. According to Reuters, the government has demanded that Etisalat take on a local partner as a condition of backing its bid. Etisalat was unavailable for comment on the news agency's report.
"The rationale for Etisalat is that Maroc Telecom fits well with Etisalat's existing footprint. Maroc Telecom has built up expertise in sub-Saharan Africa that could be an asset to Etisalat and Maroc Telecom is very profitable in ebitda [earnings before interest, taxes, depreciation and amortization] terms," said Matthew Reed, principal analyst at Informa Telecoms & Media. "But Maroc Telecom has been doing less well lately in its competitive home market of Morocco," he added.
Etisalat said in its filing that Moroccan capital markets regulations would require the company to make a mandatory tender offer to the remaining shareholders in Maroc Telecom, which could result in Etisalat further increasing its shareholding,
The UAE company is planning to finance the transaction through external borrowings. In May shareholders outlined a cap of US$8.75bn on the amount the operator can borrow to fund the acquisition, exceeding the corporation's capital.
Etisalat entered negotiations with Vivendi to acquire the stake in April, contending with Ooredoo, formerly known as Qatar Telecom, which eventually withdrew its bid last month because of the "lengthy" negotiations process. Saudi Telecom Company, Britain's Vodafone and Korea Telecom had all expressed an interest in the stake but did not submit bids.
Vivendi is in the process of offloading several of its assets as part of a strategic review intended to pay down debt, boost a flagging share price and reduce the group's exposure to capital-intensive telecoms businesses.
Maroc Telecom, which is listed on the Casablanca Stock Exchange, has a market capitalisation of $11bn and is Morocco's largest operator, but stiff competition has slowed growth in recent years.
Etisalat's revenues from its international operations in the second quarter of this year grew by 50 per cent compared to the second quarter of 2012 to Dh3.5bn. Overall revenues for the second quarter grew 20 per cent to Dh9.9bn.
Net profit after federal royalty payments rose 6 per cent to Dh1.98bn. Earnings per share reached 25 fils, a rise of 6 per cent when compared with the second quarter of last year.
"The board's declaration of interim dividend of 35 fils per share is a strong indication of our steady performance and the success of the group's strategic plan, which has been supported by a clear and ambitious vision," said Ahmad Abdulkarim Julfar, the chief executive at Etisalat Group.
Etisalat's subscribers grew 14 per cent to 143 million across the 18 markets it operates in across the Middle East, Africa and Asia. In the UAE alone, the company added 9.9 million subscribers, a year on year growth of 12 per cent.
Etisalat shares gained 1.2 per cent yesterday to close at 11.95.