Etisalat has designs on Algeria

Etisalat is keen to buy the Algerian operations of Orascom Telecom, the Egyptian company facing increasing pressure to leave its most profitable market.

BARCELONA // Etisalat is keen to buy the Algerian operations of Orascom Telecom, the Egyptian company facing increasing pressure to leave its most profitable market. Mohammed Omran, the chairman of Etisalat, said yesterday the company planned to acquire several new overseas networks this year as it expanded its international footprint. Algeria, where Orascom's Djezzy mobile network has come under fire during a diplomatic spat between Egypt and Algeria, is one such market, Mr Omran said.

Orascom faces a continuing dispute with the Algerian government over more than US$600 million (Dh2.2 billion) in back taxes. The situation was inflamed by a spate of violence and ill-will between Egyptians and Algerians following a number of controversial international football matches. The Djezzy network contributes about 50 per cent of Orascom's pre-tax earnings. "It depends on the decision of the Algeria government," Mr Omran said in an interview at Etisalat's pavilion at the Mobile World Congress. "We hear they are not looking for external or foreign investment in the country.

"If that is the case, the government would not like us or anyone else. But definitely, Algeria is a very important market [to us] and has a lot of potential to grow. I would love to have more networks in 2010 and a lot of homework has been done." The company is in negotiations with operators in Pakistan, Morocco and Iraq, while it has expressed interest in acquiring companies in India and elsewhere.

"The final decision is quite complex because it depends on other countries and the other operators we are buying and so on," Mr Omran said. "But definitely, I am confident that 2010 we will have more operators added to our portfolio." India, the world's fastest-growing mobile phone market, will be at the centre of Etisalat's international expansion this year. The company will launch its Indian subsidiary next month, Mr Omran said, and he expects the market to enter a phase of heavy consolidation with the country's 12 operators being whittled down to about six. He wants Etisalat to be one of the drivers of the consolidation process.

"Our strategy is to start in the right time with the right solution in India and work to expand with consolidating with other operators," he said. "To our understanding, the government which earlier decided that this could be done next year, will allow the decision to expedite the time for consolidation. "With that in mind, it is expected that not only us will look at ways to consolidate much faster."

Others have doubts. Earlier in the week, Naguib Sawiris, the chairman of Orascom Telecom, said cut-throat competition and calling prices of less than 1 US cent, or 3.6 fils, per minute meant India was no longer an attractive market. "India is done," he told MarketWatch news service. "Anybody who wants to go to India today is suicidal." Mr Omran disagreed, saying he will acquire other operators and share or outsource infrastructure to control costs and make money in the market. "There is definitely money in India if it is done in the right way," he said. "Part of our strategy is long-term commitment and to work with other operators to go into the second period, which is consolidation. With that, there is better returns."

Mr Omran said Etisalat was negotiating to acquire a stake in Warid Telecom in Pakistan, which is majority owned by the Abu Dhabi Group, an investment fund owned by the Abu Dhabi Royal Family. "We are looking at Warid, yes, but we have not yet decided," Mr Omran said. "It depends on both owners [of Warid]." Separately, Mr Omran said Etisalat had also re-entered negotiations to acquire Iraq's Korek Telecom and Morocco's Meditel, as well as increase its minority stake in Exelcomindo in Indonesia.

The expansion will be funded entirely from cash reserves, Mr Omran said. The company had no plans to tap into local or international debt markets.