July 25, 2012 / 8:39 PM / 5 years ago

Etisalat may increase stake in Saudi Mobily

ABU DHABI (Reuters) - Etisalat (ETEL.AD), the United Arab Emirates’ No.1 telecommunications company, may raise its holding in Saudi Arabia affiliate Mobily 7020.SE, its chief executive said on Wednesday, which could give a major boost to its bottom line if it took a majority stake.

Ahmad Julfar said Etisalat, which operates in 17 countries, could also raise its stakes in other affiliates in high growth, high population markets such as Nigeria and Pakistan.

“(We) will be working to increase value for our shareholders as well as contributing to the social and economic development of those countries,” said Julfar, who was appointed CEO in August 2011. “If increasing our stake will address those three things, then definitely we will be pursuing (this) in those three markets. We are studying that option for Saudi Arabia.”

Etisalat does not fully consolidate Mobily’s earnings because it owns a 27-28 percent stake in Saudi Arabia’s No.2 operator.

Mobily, which has a market value of $12.3 billion, reported a 22 percent rise in second-quarter profit to 1.42 billion riyals ($379 million) last week, while its 2011 annual profit was 5.08 billion riyals. Etisalat made an annual profit of 5.8 billion dirhams ($1.58 billion) last year.

Etisalat is undertaking a review of all its units, Julfar said, following a multibillion dollar foreign expansion that has so far added little to the bottom line.

These problems have prompted a major shake-up at the Gulf’s No.2 operator, with new heads of finance, marketing and strategy appointed in the past 18 months, plus a new chairman, and they appear to have a remit to clean up Etisalat’s portfolio.

“We will look at all strategic options. For example if not increasing our stake, maybe to consolidate to merge with somebody or maybe to divest or stay as business as usual,” Julfar said.

Etisalat hired Deutsche Bank to potentially help sell part of Atlantique Telecom (AT), which has operations in several African countries, including Ivory Coast, Benin, Togo and Gabon and potential buyers have been found.

“That interest grew to become interest to acquire the whole of AT,” said Julfar. “This is the discussion now with these parties. We’re not interested to sell AT as whole, but we’re interested to exit maybe one or two of these markets.”

He declined to say which AT units might be sold, but said Etisalat had frozen plans to sell its 13 percent stake Indonesia’s No.3 telco, PT XL Axiata (EXCL.JK).

“The company is performing very well, the share price is performing very well ... so we put it on hold,” said Julfar.

Axiata's shares are up 33.7 percent in 2012, outperforming the Jakarta share index .JKSE, which has gained 4.7 percent.

Etisalat has yet to decide whether to take an impairment on Pakistan Telecommunication Co Ltd (PTCA.KA) (PTCL). Its consortium bought a 26 percent stake for $2.6 billion in 2006, which is now worth about $150 million according to its value on the Karachi bourse.

“An impairment discussion, I think we will have that with the auditors towards the end of the year,” said Julfar.

Etisalat reported a 17 percent rise in quarterly profit on Wednesday, a marked improvement after its profits fell in eight of the preceding nine quarters.

The UAE provided 72 percent of revenue, although domestic earnings fell 0.4 percent due to lower call revenue, which are under pressure from internet-based telephone services such as Skype.

“Growth will come from data, TV and content on the fixed side and also from adjacencies like cloud services, e-health, mobile education, M-to-M (machine to machine) and mobile banking,” added Julfar.

Etisalat had cash and cash equivalents of 10.55 billion dirhams as of June 30.

($1 = 3.6730 UAE dirhams)

Editing by Andre Grenon

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