Etisalat gains on bid for Maroc stake

Moroccans use their mobile phones on a Rabat street. The country's government owns 30 per cent of Maroc Telecom and has to approve of any stake transaction. Abdelhak Senna / AFP

Etisalat shares surged yesterday after the Gulf's biggest telecoms operator said it would submit a binding bid to buy Vivendi's 53 per cent holding in Maroc Telecom.

Qatar Telecom also intends to bid, said a person familiar with the matter, asking not be identified because the deliberations are confidential. Vivendi's share has a market value of about US$5.9 billion.

The stake sale is part of Vivendi's plan to refocus on media and content distribution, rather than telecoms, after its chairman, Jean-Rene Fourtou, and the board decided last year to sell assets instead of splitting the Paris-based company in two.

South Korea's KT Corp, which had expressed interest in the Maroc Telecom stake, said on April 15 that it had dropped out because of "big differences" in valuation.

"The critical event is not the sale price," said Saeed Baradar, an equity sales specialist at Société Générale in London. At market value, proceeds from the stake disposal "should be sufficient to reset the debt to allow Vivendi to split itself up into media and telecoms entities and to erode the current conglomerate discount in the share price".

Vivendi has a market value of €22.1bn, compared with net debt of €13.4bn at the end of last year. Mr Fourtou is set to meet shareholders at an annual meeting on Tuesday.

Etisalat shares jumped as much as 5.5 per cent in Abu Dhabi before closing almost 4 per cent higher.

It said it may end up owning a greater than 53 per cent stake in Maroc Telecom because of local rules that require it to make a mandatory offer for minority shareholders. Morocco's government, which has a 30 per cent holding, has to be on board with any transaction.

People with knowledge of the matter said last week that Etisalat was setting terms of $8bn of loans backing its bid. Etisalat is raising debt comprising a $4bn portion to be refinanced by bonds, and three and five-year loans, the people have said.

Aside from Etisalat and KT Corp, Qatar Telecom and France Telecom were among a number of potential bidders that expressed preliminary interest in Maroc last year. Etisalat this week reported a flat first-quarter profit after federal royalty as the telecoms company added more customers but suffered pressure on margins.

* With Bloomberg News and Zawya Dow Jones