Friday, May 16, 2014

Etisalat to Sell West African Assets to Maroc Telecom

UAE-based MNO Etisalat has reported that it will sell its operations in West Africa to Moroccan MNO Maroc Telecom for a sum of US $650 million. The deal will include the sale of Atlantique Telecom, a wholly owned subsidiary of Etisalat with operations under the Moov brand in Benin, Central African Republic, Ivory Coast, Ghana, Niger and Togo. It also includes Ivory Coast-based Prestige Telecom, which provides IT services to Etisalat’s operations in all of these countries. The operator’s subsidiary in Nigeria will not be part of the transaction, which requires competition and regulatory approvals in the six West African countries. The deal has been contingent on Etisalat’s planned acquisition of Vivendi’s 53 percent stake in Maroc Telecom for €4.2 billion (US $5.7 billion), which was completed on 14 May 2014.

Vivendi, which is the parent company of French MNO SFR, has been in exclusive talks with Etisalat since July 2013 about the sale of its stake in Maroc Telecom after other bidders, including Qatar’s Ooredoo, dropped out. This sale is part of a larger move by Vivendi to focus on its more profitable media assets and has been viewed as a means to raise enough cash to write down its debts and sell SFR.

The deal has several positives for Etisalat. While the operator has a presence in 15 markets across the Middle East, Asia and Africa, its main source of revenue (at 66 percent of group revenues in Q1 2014) continues to be its home market. The UAE is a highly saturated market, which ranks highest in the world in terms of smartphone penetration (over 72 percent as of 2013). Competition is intensifying in the wake of the regulator’s elimination of the tariff approval requirement and introduction of mobile number portability in 2013. Saudi Arabia, the other Middle Eastern market in which Etisalat operates, has nearly as high a rate of mobile penetration and also will see the entry of three MVNOs. Therefore, diversification away from the Middle East makes sense.
However, some of Etisalat’s biggest international markets in terms of revenue generation, Egypt and Pakistan, have been affected by issues such as political instability and currency devaluation. Through the acquisition of Maroc Telecom, Etisalat not only gets an entry into Morocco with the leading market share of 47 percent (totaling 18.3 million subscribers), it also adds four other African countries (Burkina Faso, Gabon, Mali and Mauritania) to its portfolio and can leverage synergies that exist between operations in that region. Furthermore, placing its West African operations under the management of a successful regional operator may prove beneficial to Etisalat. 

However, it is worth noting that Maroc Telecom’s profitability in its home market has been hit by soft consumer spending and increasing competition. Bringing innovative offers to the market by leveraging the strengths of the two operators will be key to Etisalat’s future success with this acquisition.

The above item appeared in a recent issue of The Tarifica Alert, a weekly resource that analyzes noteworthy developments in the telecoms industry from around the world. To access all of the latest articles and issues:

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