Etisalat's growth across the Middle East and Africa is beginning to draw the attention of analysts concerned about its spending plans.
The UAE's largest telecommunications operator is planning to aggressively expand across the region after offering to buy a 51 per cent stake in Kuwait's Zain in a deal that would be worth about Dh44 billion (US$11.97bn). It is also bidding for licences in Syria and Libya and extending its operations in Nigeria and India, two potentially lucrative markets.
Competition in the UAE comes from, du, which has signed up significantly more mobile and internet users in the past year than the bigger company.
Etisalat's increased international spending and pressure from du should make investors wary, said Martin Mabbutt, a telecoms analyst with the Japanese investment bank Nomura. He downgraded the operator from "buy" to "neutral".
"Etisalat has been one of the most ambitious of the GCC operators in terms of its expansion in recent years, but control of Zain would be a major stepping stone in cementing its position in the Middle East region," Mr Mabbutt said.
He said Etisalat's prospective purchase of Zain and its increased spending on capital-intensive subsidiaries in India and Nigeria would dilute its value. The operator's stock now falls firmly into a "value" category with its earnings in the near-term expected to remain weak, the analyst said. In the third quarter of last year, Etisalat said its net profit declined 23 per cent to Dh1.74bn from Dh2.25bn a year earlier.
"On the basis of current forecasts, the valuation of Etisalat still makes it one of the more attractive stocks in the region at an [enterprise value] multiple of 3.5 times [this year]," Mr Mabbutt said.
"However, the scale of the dilution likely from the prospective acquisition of a controlling interest in Zain will lead to a significant increase in the multiple in the near and medium term."
He said Etisalat's intended Zain purchase should not be viewed as a "catalyst for considerable change" in the region's telecoms market.
"Zain is already an operator with very well established operations in all of its markets [except] Saudi Arabia. This latter operation will either be sold or floated as part of the deal given that Etisalat is already represented in Saudi Arabia through its stake in Mobily," Mr Mabbutt said.
Etisalat stock rose 0.5 per cent yesterday to Dh10.75.
dgeorgecosh@thenational.ae
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If you go
Flight connections to Ulaanbaatar are available through a variety of hubs, including Seoul and Beijing, with airlines including Mongolian Airlines and Korean Air. While some nationalities, such as Americans, don’t need a tourist visa for Mongolia, others, including UAE citizens, can obtain a visa on arrival, while others including UK citizens, need to obtain a visa in advance. Contact the Mongolian Embassy in the UAE for more information.
Nomadic Road offers expedition-style trips to Mongolia in January and August, and other destinations during most other months. Its nine-day August 2020 Mongolia trip will cost from $5,250 per person based on two sharing, including airport transfers, two nights’ hotel accommodation in Ulaanbaatar, vehicle rental, fuel, third party vehicle liability insurance, the services of a guide and support team, accommodation, food and entrance fees; nomadicroad.com
A fully guided three-day, two-night itinerary at Three Camel Lodge costs from $2,420 per person based on two sharing, including airport transfers, accommodation, meals and excursions including the Yol Valley and Flaming Cliffs. A return internal flight from Ulaanbaatar to Dalanzadgad costs $300 per person and the flight takes 90 minutes each way; threecamellodge.com
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The specs
Engine: 2.7-litre 4-cylinder Turbomax
Power: 310hp
Torque: 583Nm
Transmission: 8-speed automatic
Price: From Dh192,500
On sale: Now
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Racecard:
6.30pm: Mazrat Al Ruwayah (PA) | Group 2 | US$55,000 (Dirt) | 1,600 metres
7.05pm: Meydan Sprint (TB) | Group 2 | $250,000 (Turf) | 1,000m
7.40pm: Firebreak Stakes | Group 3 | $200,000 (D) | 1,600m
8.15pm: Meydan Trophy | Conditions (TB) | $100,000 (T) | 1,900m
8.50pm: Balanchine | Group 2 (TB) | $250,000 (T) | 1,800m
9.25pm: Handicap (TB) | $135,000 (D) | 1,200m
10pm: Handicap (TB) | $175,000 (T) | 2,410m.
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History's medical milestones
1799 - First small pox vaccine administered
1846 - First public demonstration of anaesthesia in surgery
1861 - Louis Pasteur published his germ theory which proved that bacteria caused diseases
1895 - Discovery of x-rays
1923 - Heart valve surgery performed successfully for first time
1928 - Alexander Fleming discovers penicillin
1953 - Structure of DNA discovered
1952 - First organ transplant - a kidney - takes place
1954 - Clinical trials of birth control pill
1979 - MRI, or magnetic resonance imaging, scanned used to diagnose illness and injury.
1998 - The first adult live-donor liver transplant is carried out
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Cracks in the Wall
Ben White, Pluto Press