Despite its parent company facing possible bankruptcy next year, the Middle East unit of the telecommunications company Nortel will continue to invest and grow, its managing director says. Nortel, which sells equipment to companies and network operators, has lost more than 98 per cent of its value this year, and will be removed from the New York Stock Exchange by the middle of next year if its share price does not improve.
"Nortel considers the Middle East to be an investment region," said Ramin Attari, who heads the company's Middle East unit. "It has been a great success story for us, and our opinion is if it's not broke, don't fix it." The company has capitalised on rapid growth in the UAE and the region in recent years, signing scores of deals with the public and private sector. In October, it finalised a major sale with du, the UAE's second telecoms company, to upgrade the capability of its network.
"For the past few years, we have seen significant growth here and we plan to see that momentum continue," Mr Attari said. Globally, the company faces a major crisis of confidence among shareholders and creditors. Nortel's share price halved in a single day in mid-September after it revised its sales projections for this year downwards, predicting a 2 to 4 per cent drop compared with last year. Ratings agencies reacted by downgrading the company's credit rating. Despite having US$2.6 billion (Dh9.55bn) of cash and no debt repayments due until 2011, analysts believe bankruptcy may be the best option. The New York Stock Exchange recently warned the company that it risked being removed from the exchange if its share price remained below $1, the minimum level allowable.
The investment bank UBS predicts that sales at Nortel could drop by 14 per cent next year. Of the 21 analysts tracked by Bloomberg, just four recommend buying Nortel shares at their current price of $0.27, while twice as many continue to recommend selling the stock. The company has announced a restructuring plan aimed at freeing up cash and moving towards more profitable markets. In the Middle East, the plan will be most clearly seen in an increased focus on selling value-added services rather than physical hardware.
"You will see a significant shift towards software, solutions and services," said Mr Attari. "For our telco customers, that will mean enabling them to deliver smarter services, helping companies reduce costs and increase the top line." Nortel's plunge in value makes it one of the hardest hit companies in the telecoms sector. But it is not the first time the Canadian company has seen its share price in freefall.
At the height of the dotcom bubble in 2000, it was valued at more than $200bn, before crashing to less than $5bn by 2002, with tens of thousands of employees losing their jobs. The company is now valued at just $134 million. email@example.com