Leading state telecoms companies from Abu Dhabi and Qatar are bidding head-to-head for Maroc Telecom, in a welcome lift to a high-profile sector where Gulf multinationals had suffered a series of international setbacks.
In one of the biggest regional acquisition deals of recent years, Abu Dhabi’s Etisalat and Qatar’s Ooredoo are seeking to expand their regional reach by capturing Vivendi’s 53 per cent stake in the Moroccan telecom operator.
Analysts say the proposed tie-up is an encouraging sign after Gulf telecoms acquisitions dried up during the financial crisis – although many still doubt if the industry can rekindle the expansionary confidence of the pre-2009 boom.
“It’s a very good bellwether – it’s significant that Arab regional operators are on the expansion again,” says Jawad Abbassi, founder and general manager of Arab Advisors Group, the telecoms analysts. “But, that era [the boom] has long passed, not only because of the financial crisis but because there are a lot less expansion opportunities than pre-2008.”
Vivendi said that it received bids from both companies on April 24. The French company – one year into an overhaul of its business interests – is expected to choose a preferred bidder soon and then start exclusive negotiations. Both Ooredoo and Etisalat have raised funds for their bids.
While credit may be flowing more easily to Gulf telecom companies, many now face greater competition back home than they did during the days when they could pursue international growth from a position of domestic monopoly. Since 2002, eight Middle Eastern markets are no longer telecoms monopolies, according to Arab Advisors.
The state-backed groups from Abu Dhabi and Qatar are now stepping up as others have retrenched. Kuwait’s Zain, one of the early leaders from the Gulf, was forced to sell assets after the financial crisis took a grip on its shareholders. Under pressure from failing assets elsewhere, its shareholders forced the sale of Zain’s Africa assets.
While Etisalat is bigger than Ooredoo by market capitalisation, the Qatari company is quickly catching up. The market capitalisation of Ooredoo almost doubled in the year 2012 to $12.3bn, according to data provider Zawya. That compares with a market cap of $19.5bn at Etisalat at the end of 2012.
On paper, Ooredoo and Etisalat are not different. Both are ratied A plus at Fitch Ratings, with the government holding 68 per cent in Ooredoo and 60 per cent in the case of Etisalat. With such state-backing, neither has struggled to raise the multibillion-dollar sums required for this acquisition.
Both companies were profitable in 2012 and also enjoy the benefits of restricted competition in their domestic markets.
Ooredoo, is the younger of the two and was established in 1987. It is traded in London through global depositary receipts in Doha and Abu Dhabi. Etisalat, set up in 1976, trades in Abu Dhabi.
“It will boil down to what people are willing to pay” in this deal, says Mr Abbassi.
The acquisition is also subject to approval by the Moroccan government, which owns just under a third of Maroc Telecom. Some analysts suggest that while both governments have good relations with Morocco, Abu Dhabi may be closer. Members of Abu Dhabi’s ruling family choose to holiday in Morocco and own property there.
Ooredoo’s head of strategy Jeremy Sell played down any political obstacles for the bid to succeed, with some analysts featuring that the veto power held by Rabat could ultimately decide the auction.
He said: “Ooredoo and Etisalat are equally welcome in the Kingdom of Morocco.”
Ooredoo expanded aggressively last year. The company boosted its stake in Kuwait’s Wataniya and its operations to 92.1 per cent. It also raised Wataniya and Ooredoo’s stake in Tunisia’s Tunisiana, while increasing its ownership in Iraq’s Asiacell.
Ooredoo’s Mr Sell told the Financial Times that the company had pitched a competitive offer to Vivendi, and had lined up “several banks” to fully fund the bid with debt.
He said that the group would consider covering these loans in the capital markets if the bid were to be successful, either through bond or equity issuance.
“We pushed hard on terms and conditions. There are no financing problems. It is a bid ready to go. We valued [Maroc] fairly. We have a good record of closing bids.”
The next battlefield may prove to be sub Saharan Africa, where Ooredoo is keen to expand. “We would be acquiring expertise, skillset and a balance sheet to go into sub Saharan Africa.”
Maroc Telecom is listed in Casablanca and Paris and has controlling stakes in four other telecom operators in west Africa.
“Etisalat firmly believes that Maroc Telecom fits within its international expansion strategy and would complement its existing west African portfolio,” the company said in a statement April 24. The company declined a request for further comment.
While political difference between the UAE and Qatar have surfaced over their contradictory views towards the Muslim Brotherhood, this is one of the first public contests between national commercial interests that are in increasing competition.
Both emirates also operate rival airlines: Qatar Airways competes with Emirates of Dubai and Etihad of Abu Dhabi. The two cities are also pushing to become financial and cultural hubs.
