Etisalat bags investment kudos

The UAE national telecommunications company, Etisalat, is now the fastest growing mobile operator in the world.

Growing without a pause: Etisalat is continuing its winning ways with the launch of a new network in Nigeria in the second half of this year.
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The UAE national telecommunications company, Etisalat, is now the fastest growing mobile operator in the world, and yesterday received an investment-grade credit rating from the world's leading ratings agencies. In a review of global subscriber growth in the first quarter of 2008, the publishers of Global Mobile, an industry newsletter, said Etisalat overtook Zain of Kuwait to take the number one spot.

Its cash-cow domestic businesses, rapid international growth and state backing all factored into the company receiving investment-grade credit ratings from Standard & Poor's, Fitch Ratings and Moody's. The company's chief financial officer, Salem Ali al Sharhan, said the ratings would help it secure funding for new acquisitions. The business has been scouting for an Indian network since the beginning of the year, and has said it would close a deal by the end of the summer. Mr Sharhan said that such a deal would be closed within months. "We have potential opportunities in the pipeline and are carrying out due diligence on some of them," he said.

India's Financial Chronicle yesterday reported that Etisalat could acquire a $1.1bn, or 51 per cent, majority stake in Swan Telecom, a newly licensed operator. The ratings yesterday were the first given to Etisalat. Their evaluations of the company's ability to meet debt obligations will allow Etisalat to gain access to international financing at a lower cost. Government debt backed by state treasuries is typically the highest rated. Etisalat's state ownership and Government backing played a role in boosting its rating beyond the level that would typically be assigned to a growing international business.

Moody's now rates Etisalat as more likely to repay debt than major global private-sector telecom companies such as Nokia, Vodafone and MTN of South Africa. Fitch said the UAE Government "is fully behind the company's expansion plans and fully supports its business", while Standard & Poor's said the state was "politically and financially supportive" of Etisalat. All three agencies credited the company's high-margin domestic business as a key reason for a positive future outlook. Its expansion into high-growth emerging markets in Africa and Asia was also listed as a major factor.

Etisalat's international business has doubled in size in the past year as the company made major investments in markets from Sudan to Indonesia. The report listed proportionate subscribers, a figure that scales customer numbers to reflect each company's full or partial ownership of international affiliates. Etisalat holds minority stakes in networks in growing markets including Indonesia and Pakistan.

In proportionate terms the company had 24.3 million mobile subscribers at the end of the first quarter of this year, up by 106 per cent from a year earlier. Since launching in Egypt in the middle of last year, Etisalat has acquired at least three million customers, although up to date figures have not been released. Etisalat's rapid growth is largely a function of its small beginnings; of the 15 fastest growing companies listed, only Telekom Austria, at number seven, had less subscribers.

The rapid growth is likely to continue, with the company's new network in Nigeria to launch in the second half of this year. In the long run, Etisalat hopes to take a share of more than 25 per cent of Africa's largest telecommunications market; the company said it would sign up at least a million customers in its first year of operations. Etisalat's acquisition of a minority stake in Excelcomindo, an operator from Indonesia, has given the company exposure to one of the world's largest growth markets; mobile penetration in the nation of 235 million is less than 50 per cent.

Excelcomindo added almost three million new subscribers in the first quarter of this year, and is now the country's third-largest operator. Jamal Jarwarn, the chief executive of international business at Etisalat, has said the company would like to grow its 16 per cent stake in Excelcomindo into a majority holding.