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Overseas Talk
 
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“Despite a Saturated UAE Market, our Subscriber Base Grew”

Issue Date - 09/06/2011
 
With 135 million mobile subscribers, UAE’s Emirates Telecom Corp. (Etisalat), is a $9 billion-a-year topline earning name. Ahmed Bin Ali, Group Sr. VP & Global Spokesperson for Etisalat, talks to B&E’s steven philip warner, about his company’s fight in a saturated domestic market, its 4G dreams, multi-billion capex plans and why the company scrapped a $122 million plan to bid for Syria’s third mobile licence.

B&E: Emirates Telecommunications Corporation, Etisalat, currently operates in 18 countries across Asia, the Middle East and Africa. There is speculation that you are looking to expand into new geographies outside the continents you are currently operating in. Is that true?
Ahmed Bin Ali (ABA): No. Actually, for the present, Etisalat is focussed on expanding strategically within our core markets of Asia, the Middle East and Africa. You need to understand that we are in a position where we have already developed a significant footprint and established a presence in the most active and fastest growing markets in these regions. Our operations in these regions are growing strongly, and we are quite a satisfied company with our current continents where we operate in, for now.

B&E: So you say, you sit very comfortable in terms of geographies. Since 2006, Etisalat has invested close to $5.74 billion as capex in these markets – a larger chunk of which was in overseas markets, outside the UAE. But there are some danger signs when it comes to your payoffs. As compared to the previous year, your net profit actually fell by 13.6% in FY2010. Do we take this as a sign of some uncertainty in your international investment strategy?
ABA: In FY2010, our international operations increased their contribution to our Group’s revenues to 23% from 16% in 2009, and profits to 7% from less than 1% the year before. Given the relative young age of our operations, these are good indicators that our investment strategy is on track. Today, we continue to have a strong balance sheet and are rated amongst the most creditworthy operators in the world by global credit rating agencies. This means we even have the ability to engage in acquisitions.

B&E: In March this year, the company withdrew plans to bid for Syria’s third mobile licence. The company said that the terms of the deal did not offer sufficient value for its shareholders. Could you please elaborate?
ABA: True. Earlier this year, Etisalat decided not to proceed and compete in the Syrian mobile bid, despite having earlier qualified to participate in the process. Etisalat conducted an extensive and careful study alongside financial advisors, legal experts and technicians and determined that the terms and conditions of the bid would not enable Etisalat to achieve its objectives regarding the technology and value we wished to bring to the market. We worked hard to develop this opportunity, but we had hoped the terms and conditions would have been more attractive.

B&E: Etisalat plans to invest $15 billion (Dhiram 55.09 billion) to upgrade its telecommunications networks over the next five years to meet the expected demand in online data usage. How do you plan to finance the expenditures?
ABA: Etisalat has a variety of tools which it can access to finance its payments – including cash. We are not highly leveraged and have strong relationships with all the major international and regional banks. We are a long-term investor and although the capex may rise in the short-term, this infrastructure is essential if we are to compete several years down the road. The growth in Internet usage is such that if operators do not put in place fiber optic networks and new wireless broadband technologies right away, the consumer will find their experience greatly reduced. And we are aware of that.

 
B&E: Is 4G a distant dream for you?
ABA: Absolutely not. Currently, the demand for high speed mobile broadband capacity is growing at a pace, which soon will not match the growth in revenues. In that sense, 4G LTE (Long Term Evolution) will prove a highly efficient method of delivering the high-speed mobile broadband technology to the markets. Therefore to continue to deliver the service that our clients currently enjoy with the new services that are expected in the future, LTE is an essential component of our network strategy. We are currently deploying LTE in the UAE – which is also currently the region’s largest LTE network – and Saudi Arabia. And we already have high speed mobile data networks in several other markets across the Middle East, Africa and Asia based on 3G, HSDPA, CDMA and other technologies. In May 2011, we introduced 3.75G in Sri Lanka bringing speeds of up to 42Mbps for the first time. So with 4G, we are already knocking at many doors.

B&E: Your operating profit fell down by nearly 9% during FY2008, but bounced back considerably by more than 30% in FY2009. Did you face some very challenging times during the recent slowdown?
ABA: Every company and every industry faced challenges during a downturn. I won’t deny it - we had our share of problems too. However, Etisalat fared better in comparison to other telcos. This is due to our rightly timed investment in next-generation technologies and services and participation in some of the fastest growing mobile markets in the world.

B&E: Don’t you think a focus on international markets has effected into you losing out on market share to your competitor “du” in your home market?
ABA: Competition makes us stronger and we have only grown faster and performed better from a financial point of view in the years since competition was introduced into the UAE. Despite the introduction of a competitor, and a highly saturated UAE market, our mobile subscriber base grew in 2010 over 2009 – a clear sign that we are successfully developing the market. To be honest, our international footprint is not only working as a cushion against any fall in consumer base or reduction in revenues that we see from our UAE operation, but it is also providing synergies that are helping cut costs and offer new opportunities. Therefore, all-in-all, our international expansion has made us significantly stronger.

          

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