Etisalat has taken a Dh3 billion (US$816.7 million) hit in India, after its joint venture in the subcontinent was stripped of its mobile licence.
The UAE company - through its Etisalat DB joint venture - was one of several telecoms operators to lose its mobile licence in India under a ruling by the country's supreme court.
Etisalat reported an impairment charge of Dh3.04bn due to the cancellation of the licence.
This had a net impact of Dh1.02bn on its profit, after a royalty fee to the UAE government, the firm said.
"The supreme court's decision took the entire industry by surprise and significantly alters the competitive landscape in India's telecommunications market," Etisalat said in a statement.
"Etisalat expects the government of India to bring about a rapid and just solution and to fairly compensate investors," it added.
"Etisalat is also continuing to assess the legal consequences of the supreme court's decision and Etisalat's strategic options in India."
In a dramatic court judgement, the supreme court of India last week revoked 122 mobile licences that were issued in January 2008.
The licences were sold at cut-price rates, leading to a wide-ranging corruption scandal over estimated potential losses to the Indian state of up to US$36bn.
Swan Telecom was one of the companies that acquired the licences. Etisalat later acquired a stake in the firm and the company was renamed Etisalat DB.
Ibrahim Masood, a director and senior investment officer for asset management at Mashreq, said that the write-down disclosure by Etisalat provides clarity to the market.
"They seem to have taken it in one shot, so that's a good thing," said Mr Masood.
He said that he did not see a long-term impact on Etisalat's share price.
"Perhaps this will spook a few investors," said Mr Masood. "But I'd be surprised if there was a sell-off. I'd expect that to be short-lived."
Etisalat's impairment charge on its Indian operation hit the firm's bottom line for last year.
Total profits, after a royalty payment to the UAE government, stood at Dh5.84bn last year, Etisalat said yesterday. That represented a 23.5 per cent drop in profits on 2010, which stood at Dh7.63bn.
Etisalat's group revenues last year edged up by 1 per cent to Dh32.24bn, compared with Dh31.93bn in 2010.
In the UAE, the group reported 7.8 million mobile customers, 1.05 million fixed-line telephone customers, and 1.41 million internet users.
Mr Masood said Etisalat's results were fairly encouraging, especially given the increasing competitive threat from rival du in its domestic market.
"The operational side for a mature telecoms operator wasn't too bad," he said.
Etisalat's move to report impairment charges for its Indian operations follows a similar step by Norway's Telenor, which last week wrote down $721m in licences and goodwill in India, Reuters reported.
It also follows a decision by the Bahraini telecoms company Batelco Group to abort its operations in India.
On Wednesday, Batelco said it is selling its stake in the Indian mobile operator STel, making it the first operator to exit India following the court's decision to cancel mobile licences there.
BMIC, a subsidiary of Batelco, has agreed to sell its 42.7 per cent stake in the firm to its Indian partner Sky City Foundation Limited, for $174.5m.
Batelco said the decision to sell the stake was made in April 2011. However, confirmation of the sale came just a week after India's supreme court cancelled the mobile licence belonging to STel, along with other companies such as Etisalat DB.
bflanagan@thenational.ae
twitter: Follow our breaking business news and retweet to your followers. Follow us
Getting there
The flights
Flydubai operates up to seven flights a week to Helsinki. Return fares to Helsinki from Dubai start from Dh1,545 in Economy and Dh7,560 in Business Class.
The stay
Golden Crown Igloos in Levi offer stays from Dh1,215 per person per night for a superior igloo; www.leviniglut.net
Panorama Hotel in Levi is conveniently located at the top of Levi fell, a short walk from the gondola. Stays start from Dh292 per night based on two people sharing; www. golevi.fi/en/accommodation/hotel-levi-panorama
Arctic Treehouse Hotel in Rovaniemi offers stays from Dh1,379 per night based on two people sharing; www.arctictreehousehotel.com
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
How to protect yourself when air quality drops
Install an air filter in your home.
Close your windows and turn on the AC.
Shower or bath after being outside.
Wear a face mask.
Stay indoors when conditions are particularly poor.
If driving, turn your engine off when stationary.
