Etisalat and du increase foreign ownership caps to 49%

UAE telecoms operators performed strongly last year with gains between 8% and 11%

Etisalat and du have raised the foreign ownership cap in a bid to attract more investors. Courtesy Etisalat

The UAE's biggest telecoms company Etisalat and Emirates Integrated Telecommunications Company, also known as du, have increased foreign ownership caps to attract more external investors.

"Etisalat Group's board of directors discussed increasing the ownership limit of the non-UAE nationals in the company and resolved to increase such limit from 20 per cent to 49 per cent of its capital," the company said in a regulatory filing with the Abu Dhabi Securities Exchange, where its shares trade.

The decision requires approval of the company’s general assembly and regulatory authorities.

While non-UAE nationals are entitled to own shares up to 49 per cent of the company, local and international telecommunication companies are not permitted to own a stake in du, the company said in a statement on Dubai Financial Market where its shares trade.

"With the exception of the shareholders holding more than 5 per cent in the company's capital as of the date of this resolution, no individual or legal entities [are] allowed to own more than 5 per cent in the company's capital," du said.

Etisalat and du had first opened up for foreign ownership in 2015 with a 20 per cent limit cap.

"We view these announcements positively as they will likely result in upward re-rating for both stocks," Omar Maher, telecoms analyst at EFG Hermes, told The National.

In Etisalat’s case, increasing the foreign ownership limit would result in significant passive inflows, which would lead to a significant re-rating of the stock, added Mr Maher.

“In du’s case, despite the likelihood the stock would not qualify for index inclusion, we still expect the rally to continue.”

Shares in both mobile operators had surged more than 14 per cent earlier in the week following the announcement they would consider lifting the cap on foreign ownership.

Etisalat was lower 3.18 per cent at Dh19.5 per share at the close of trading on Thursday. Du's shares were down 1.4 per cent to Dh6.5 a share.

The decision to increase the cap is "a big positive" for the companies and the UAE telecom sector, said Vijay Valecha, chief investment officer at Century Financial. It will attract monetary capital as well as other non-monetary advantages like technology transfer and human capital, he said.

Abu Dhabi-based Etisalat is 60 per cent owned by Emirates Investment Authority, while the UAE’s second licensed telecommunications provider, EITC is 50.12 per cent owned by EIA, 10.06 per cent by Mubadala and 19.7 per cent by Emirates International Telecommunications.

Several banks in the UAE, the second biggest Arab economy, have increased foreign ownership caps on their stocks to attract more investors after the country eased its foreign ownership limit restrictions.