Etisalat now bigger than Saudi Telecom

Tom Gara

• Last Updated: April 17. 2008 5:22AM UAE / April 17. 2008 1:22AM GMT

Moving ahead: Etisalat has taken the number one position in the Gulf. Jaime Puebla / The Nation

Etisalat has overtaken Saudi Telecom to become the Arab world’s largest telecommunications company by market value.

Etisalat’s value has increased by almost 10 per cent, to Dh131.1 billion (US$35.6bn), in the past two weeks. On April 7 it sold a quarter of its 35 per cent stake in Mobily, its Saudi affiliate, earning Dh2.33bn in the process.

Saudi Telecom, which has long been the largest telecommunications business in the region, has lost more than 20 per cent of its value since announcing its 2007 results on Jan 21. It is now valued at Dh129.5bn.

While Etislat has expanded aggressively in recent years, Saudi Telecom has struggled to build a competitive international business. Etisalat now operates in 16 countries, reaching a potential audience of more than 800 million people.

International expansion, particularly focused on Africa, has been the dominant theme in the growth of major Arab telecommunications businesses. Qtel of Qatar, Zain of Kuwait and Orascom Telecom of Egypt have all looked abroad for growth in recent years.

GCC operators have experienced oversaturation and increased competition in their home markets. The UAE now has a market penetration rate of more than 150 per cent, and Etisalat’s average revenue per user has remained stagnant since 2004.

Facing increasingly mature markets at home, Arab operators are viewing risky emerging economies as ripe fields of underserved customers.

Few seem to share the conservative attitude toward risk displayed by their European competitors; Orascom recently announced that it would invest $400 million building North Korea’s first mobile network.

Etisalat has voiced an interest in acquiring Spice, an Indian operator, while Zain has long been rumoured to be preparing for a foray into China, the world’s largest telecommunications market by subscriber numbers.

More than 40 per cent of Etisalat’s international customers are in Egypt, where the company paid Dh10.6 bn for a mobile licence in mid-2006.

Saudi Telecom made a bid for the licence in partnership with Telecom Malaysia, but did not pass the initial round of technical evaluations.

Saudi Telecom owns minority stakes in ventures in Malaysia and Kuwait, as well as a 35 per cent share of Oger Telecom, which runs networks in Turkey and South Africa. In March, the company revealed plans to spend more than US$15bn on international acquisitions in the coming year.

In June, it will compete with Etisalat in the auction of Egypt’s second fixed-line telecommunications license.

It also hoped to acquire mobile licenses in Lebanon and Bahrain, which are expected to be on sale by the end of the year.

tgara@thenational.ae