etisalat expands global footprint

Dubai: Emirates Telecommunication Corporation (etisalat), one of the region's largest telecom companies, has spread its reach to 18 countries in the past 32 years.

The large leap is evidence of its aims to be one of the top 10 operators worldwide by 2010. The expeditious acquisition plan, which began with Tanzania's fourth mobile licence provider, Zanzibar Telecom (Zantel) in 1999, is well under way with less than a year left. Early last year, the operator was ranked among the 20 largest operators in the world.

"etisalat is in its strongest position ever and is on course to achieving its goal of being one of the top 10 operators in the world by 2010," said Mohammad Hassan Omran, chairman of etisalat.

While the economic crisis is a speed-breaker for most companies, the corporation born in the UAE is taking advantage of its superior financial position. The Gulf's second-largest telecom company by market value, after Saudi Telecom Company (STC), has recently added Iran to its list of conquests.

The company will invest more than $1 billion (Dh3.67 billion) in rolling out a third generation, or 3G, mobile network in Iran. The first in the country, the 3G licence will guarantee two years of exclusive rights for service. The network will provide capabilities of faster transfer of high volumes of data. Expectations are high from a country of low mobile penetration of 60 per cent and a high population of 73 million.

In 2004, etisalat acquired a 27.4 per cent stake in the second mobile service licence in Saudi Arabia for Dh12.67 billion ($3.45billion). With Mobily, it has acquired 12 million subscribers in four years of operations.

It has also enjoyed considerable activity in Africa with the acquisition of Atlantique, which gave it direct access to six African telecom markets of Niger, Ivory Coast, Benin, Gabon, Burkina Faso and Togo. With an 82 per cent stake in the licence, it has coverage of 50 million people since 2005.

The company saw the fastest growth in Egypt, after acquiring the incumbent in 2006, the third mobile service licence. In the first 50 days of operation, the operator acquired approximately one million subscribers and 5.6 million towards the middle of 2008.

One of the latest acquisitions for the operator was a 45 per cent stake in Swan Telecom, India, last year, for $900 million (Dh 3.3 billion). The licence will allow the operator to reach a population of 900 million.

The operator's last count of international subscribers in 2008 was at 74 million across 17 markets, which will see a massive jump as the latest networks in countries like Iran, Pakistan, India and Iraq are rolled out.

etisalat stands 140th among the Financial Times Top 500 Corporations in the world in terms of market capitalisation.

In 1982, etisalat was the first telecom operator in the region to introduce a mobile phone service, and was one of the early adopters of GSM technology, introducing it to customers in 1994.

Since then it has established itself as a regional leader by introducing both 3G and MMS in 2003, and most recently, the BlackBerry service in 2006.

Dubai Despite the entrance of a second operator in etisalat's home market in 2007, the company has reported consolidated revenues of Dh21.3 billion in 2007, growing by 31 per cent on year -on-year basis.

The mobile segment revenues still dominate the group's consolidated revenues, forming 64 per cent of the group's consolidated revenues in 2007 compared to a share of 63 per cent in 2006.

The fixed lines segment on the other hand witnessed a declining share in consolidated revenues, forming 14 per cent of revenues compared to a share of 17 per cent in 2006, while the data services segment share increased from eight per cent in 2006 to 10 per cent in 2007, and also witnessed the highest growth rate, growing annual by 50 per cent.

"The group has expanded its portfolio of regional and international investments in order to offset the impact of its shrinking market share in its home market.

"We expect the share of international operations of the group's top line results to increase from six per cent in 2007 to 11 per cent in 2011," a report by Global Investment House said.

It said that the company's revenues from international operations will grow by a compound annual growth rate (CAGR) of 25 per cent during 2008-2011.

"We are particularly bullish on the group's operations in West Africa, and Egypt, and we believe that they will be the main contributors to the group's international revenues, and will also witness the highest growth rates in subscribers and revenues," it said.

"Mobily would still be the main contributor to revenue from associates, the report added.

A research analyst, Irfan Ellam at Al Mal Capital, an investment bank, said that etisalat should not have any problems in raising debt despite the market condition, if need be. He said that possible opportunities for licences include those in Lebanon, Syria, Tunisia, Algeria, Libya and Oman.

"We see regional operators becoming global operators and emerging market operators outperforming developed market operators," Ellam said, adding that existing operators will increase their footprint by "targeted licence acquisition and selective smaller acquisitions."

Meanwhile, Nicholas Jotischky, principal analyst, Industry Research at Informa Telecoms and Media said: "The Iranian licensing win was a big win for etisalat and continues its focus on the wider region."

He added that continued expansion is expected in Africa and South Asia, where markets such as Vietnam and Indonesia still provide huge potential for growth.

Additionally, Matthew Reed, senior analyst Middle East and Africa, Informa Telecoms and Media said, "etisalat is thought to be in negotiations to take over Korek Telecom, the third operator in Iraq, so it still seems to be planning to expand further overseas."

The economic downturn could bring down the cost of companies and/or licences to the advantage of an investor like etisalat," said Reed.