Etisalat to ramp up offshore revenue

David George-Cosh

• Last Updated: October 18. 2009 11:30PM UAE / October 18. 2009 7:30PM GMT

Etisalat continues to grow its subscriber base, in spite of the economic downturn. Jaime Puebla / The National

Half of Etisalat’s revenue growth will come from outside the UAE within five years, the chief executive of its international unit said on Sunday.

The telecommunications operator has maintained an interest in investing in a number of regional markets including Iraq, Iran, Libya, Algeria, and Morocco to expand its revenue growth for the future, Jamal al Jarwan, the chief executive of the international unit, said in an interview at the annual Gitex technology show.

“The opportunities today in telecom is in emerging markets,” said Mr al Jarwan. “It is a matter of priority. Today, the priority is the emerging market in the MENA region.”
Etisalat reported its third-quarter earnings yesterday, surprising analysts by reporting growing revenues, a 5 per cent profit increase compared with the same period last year and 180,000 new subscribers.

Most industry watchers had predicted the company would lose domestic customers due to overall population decline and a reduction in business and leisure visitors.
But while the number of new subscribers is good news, the company said its future was increasingly tied to subsidiaries and affiliates in 17 markets in the Middle East, Asia and Africa, which now have more than 85 million subscribers.

“You are seeing revenues and ebitda [earnings before interest, taxes, depreciation, and amortisation] coming from international is in the growth stage. It has a very positive impact on its balance sheet,” Mr al Jarwan said.

He said Etisalat would invest up to 1 billion Libyan dinars (Dh3.02bn) to build and pay for the country’s third mobile licence.

“This is the first privatisation for Libya,” he said. “Being first, we can bring a lot to the Libyan market, from services to our experience, and it really complements the MENA region.”

Mr al Jarwan also said he remained interested in Iran, despite Etisalat’s winning bid for the country’s third mobile licence being rejected in May by the country’s Communications Regulatory Authority.

“It is natural that we look around us. This is the region we invest in,” he said. “We bid, and we succeeded, and we won, and exited, so naturally it’s just to watch what’s going on.”

Etisalat announced on Saturday that it had acquired a 100 per cent stake in Tigo Sri Lanka, a wholly owned unit of the Luxembourg-based Millicom International Cellular, for US$207 million (Dh760.3m).

The Sri Lankan operator is the country’s second-largest mobile network with 2.25 million subscribers and 21 per cent market share.

Reports last week had Etisalat close to finalising a bond issuance programme this year or by early next year to help finance overseas expansion. But the company yesterday said it had no immediate plans to issue bonds, Reuters reported.

In an earnings report posted on the Abu Dhabi Securities Exchange (ADX) website, Etisalat said third-quarter profit rose to Dh2.25bn from Dh2.14bn in the same period last year.

But its profit over the past nine months fell to Dh6.85bn from Dh7.19bn a year earlier. The company said it was “unaffected” by the property crisis in the UAE, and that mobile services demand continued to grow, reaching 7.44 million subscribers by last month. It said internet services grew 10 per cent to reach 1.27 million subscribers.
Etisalat’s figures indicated that the impact of the crisis was panning out quicker than people expected, said Irfan Ellam, a telecoms analyst with Al Mal Capital.

“The results are lower than its second quarter but it’s better than expected,” Mr Ellam said. “The biggest portion of their revenue comes from mobile, specifically mobile in the UAE. We thought they’d lose subscribers but they’ve added 180,000.
“However, we’re not out of the woods yet. We still have to see the next quarter’s numbers to get a feeling of what’s going on.”

Mr Ellam said Etisalat would have to go on a buying spree to reach Mr al Jarwan’s targets of international operations accounting for 50 per cent revenue growth by 2012.
“Based on our current projections, we are projecting that by 2012, 23 per cent of their revenue will come from overseas,” he said.

“If they’re talking about 50 per cent, they’re going to have to do some serious acquisitions. The implication is that the acquisitions they’ll do is through existing operations, because they won’t get that kind of growth organically.”

Etisalat shares ended the day flat on the ADX, dipping 0.4 per cent to close at Dh12.55.
dgeorgecosh@thenational.ae