Zain deal throws doubt on Etisalat's Saudi operations



The future of the Saudi Arabian operations of Etisalat and Zain are in doubt after the UAE telecommunications company made a preliminary bid for 46 per cent of the Kuwaiti group.

Etisalat's offer of US$10.5 billion (Dh38.56bn), or 1.70 Kuwaiti dinars a share, could lead to one of the Gulf's largest acquisitions and make the company one of the world's largest telecoms operators.

Etisalat and Zain operate mobile phone businesses in Saudi Arabia - Mobily and Zain Saudi Arabia respectively - and analysts say the kingdom's regulator could have a problem if the deal went through. "This is what's puzzling to me and I'm guessing that the regulator won't allow that," said a telecoms analyst based in Dubai who asked not to be identified. "Etisalat would control the second and third operator in the market and create a duopoly in the market. That was not the intent of the regulator when it issued its licences in 2007 when it wanted to create competition [in the mobile sector]."

Officials at the Communications and Information Technology Commission in Riyadh could not be reached. Ahmed bin Ali, the group vice president of corporate communications for Etisalat, declined to comment on its Saudi plans. But Mr bin Ali stressed conditions would have to be met for the deal to go through. "We would like to emphasise that no final agreement has been reached at this point in time as this offer depends on the fulfilment of specific requirements and conditions that must be met to finalise the deal," he said.

Kuwait's Kharafi Group, which owns more than 20 per cent of Zain, is reported to have accepted Etisalat's offer, an informed source told Reuters. Nasser al Kharafi, the chairman of the Kharafi Group, told the Kuwaiti newspaper Al Qabas yesterday the offer was "suitable and good for both parties". Antoine Aboukhalil, a spokesman for Zain, declined to comment, saying the matter was a shareholder issue.

Irfan Ellam, a telecoms analyst with Al Mal Capital, said Etisalat should have no problem funding the deal because the operator had about Dh11bn in cash reserves at the end of its most recent quarter and could raise an extra Dh58bn without harming its credit rating. "They can close up to Dh70bn, which covers the 46 per cent [stake] and they can service that easily," Mr Ellam said. Etisalat stock closed yesterday down 0.4 per cent on the Abu Dhabi Securities Exchange while Zain shares were halted in Kuwait, and are due to resume trading on Sunday.

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UAE athletes heading to Paris 2024

Equestrian
Abdullah Humaid Al Muhairi, Abdullah Al Marri, Omar Al Marzooqi, Salem Al Suwaidi, and Ali Al Karbi (four to be selected).
Judo
Men: Narmandakh Bayanmunkh (66kg), Nugzari Tatalashvili (81kg), Aram Grigorian (90kg), Dzhafar Kostoev (100kg), Magomedomar Magomedomarov (+100kg); women's Khorloodoi Bishrelt (52kg).

Cycling
Safia Al Sayegh (women's road race).

Swimming
Men: Yousef Rashid Al Matroushi (100m freestyle); women: Maha Abdullah Al Shehi (200m freestyle).

Athletics
Maryam Mohammed Al Farsi (women's 100 metres).

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Company: Eco Way
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Founder: Ivan Kroshnyi
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Industry: Electric vehicles
Investors: Bootstrapped with undisclosed funding. Looking to raise funds from outside

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New Zealand 15
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Conversions: B Barrett
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British & Irish Lions 15
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Company profile

Name: Maly Tech
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Based: Dubai International Financial Centre
Sector: FinTech
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Current number of staff: 15
Investment stage: Pre-seed, planning first seed round
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Company profile

Company name: amana
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Based: UAE
Regulator: DFSA
Sector: Financial services
Current number of staff: 85
Investment stage: Self-funded

COMPANY PROFILE

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6pm: Go Soldier Go
6.35pm: Man Of Promise
7.10pm: Withering
7.45pm: Mawj
8.20pm: Falling Shadow
8.55pm: Law Of Peace
9.30pm: Naval Power
10.05pm: The Attorney

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Director: Siddharth Anand 

Stars: Shah Rukh Khan, Deepika Padukone, John Abraham 

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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.

Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.

Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.

Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.

“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.

Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.

From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.

Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.

BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.

Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.

Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.

“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.

Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.

“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.

“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”

The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”

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Rating: 4/5

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Cory Sandhagen v Umar Nurmagomedov
Nick Diaz v Vicente Luque
Michael Chiesa v Tony Ferguson
Deiveson Figueiredo v Marlon Vera
Mackenzie Dern v Loopy Godinez

Tickets for the August 3 Fight Night, held in partnership with the Department of Culture and Tourism Abu Dhabi, went on sale earlier this month, through www.etihadarena.ae and www.ticketmaster.ae.