Etisalat casts prudent eye abroad

Etisalat says it is 'revisiting' its international portfolio, with consolidation and divestment of assets among the options in some markets.

Etisalatplans to concentrate on its current portfolio and will be ‘very selective’ in any future acquisitions. Danish Siddiqui / Reuters

Etisalat is considering the divestment or consolidation of some of its international operations following a period of aggressive but problematic global expansion for the UAE operator.

The Abu Dhabi-listed company plans to concentrate on its current portfolio and will be "very selective" in any future acquisitions, according to its chief executive.

That marks a shift in strategy for Etisalat, which has rapidly built operations in 17 markets across the Middle East, Africa and Asia.

Ahmad Abdulkarim Julfar, Etisalat's group chief executive, said the operator was considering exiting or consolidating its operations in one or more markets.

"Our strategy is, number one, to focus on the portfolio we have," he said.

"Within this portfolio we have a few markets which we are revisiting: should we stay in this market, or should we consolidate, or should we divest?"

Etisalat has faced several setbacks in its international ambitions. Last year it aborted a US$12 billion (Dh44.07bn) bid for a controlling stake in the regional operator Zain Group.

And Etisalat's joint venture in India was among several operators to have its mobile licences revoked this year, in what was one of the country's largest corporate scandals.

The operator is exiting the Indian market, having sustained a Dh3.04bn impairment charge over its operation there.

Despite these setbacks, Etisalat reported a 21 per cent growth in its overseas revenues in the first quarter compared with the same period last year.

Mr Julfar said he was hopeful of further growth outside the UAE. "We are successfully shifting our business model to higher margin services and driving growth in underpenetrated emerging markets."

However, he added Etisalat would be cautious about entering new markets.

"We believe there will be very good opportunities coming," he said. "So we are exploring these opportunities. And I think there will be something but completely different than what Etisalat has done in the past. We will be very selective, very careful."

Etisalat last week reported a net profit of Dh1.81bn for the first quarter, down a fraction on the Dh1.82bn reported for the same period last year. The operator has come under increasing pressure on the home front, where the rival operator du has rapidly gained market share in the mobile business.

Mr Julfar said the uptake of broadband and mobile-data packages could help to boost its UAE business.

"We are very, very optimistic we will see it as another growth engine for us, especially from data," he said of the UAE market.

Mr Julfar was speaking at the TMT Finance & Investment Middle East conference in Dubai.

Other Middle East telecommunications executives said they expected a period of "rationalisation" of telecoms firms' operations.

"Operators in the region are expected to pursue their portfolio rationalisation at this stage, given that the [mergers and acquisitions] scene is a little bit quiet these days," said Ghassan Hasbani, the chief executive of international operations at Saudi Telecom Company.

According to the consultancy Booz & Company, Middle East telecoms companies have the opportunity to raise their earnings margins by up to 10 percentage points if they focus on "sustainable growth". That follows a decade in which many major telecoms operators expanded far beyond their domestic borders.

"Many operators … did not keep a close eye on how each newly acquired operation fit into their overall portfolio," said Karim Sabbagh, a senior partner at Booz.

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