06/05/2014 07:18 AST
Etisalat, which is set to buy a majority stake in Maroc Telecom, has agreed to sell its West African business to the Moroccan firm for $650mn to tap its expertise in that region.
The deal will enable the United Arab Emirates telecom operator to offload assets that have added little to its bottom line to Maroc Telecom, whose operations in Gabon, Mali, Burkina Faso and Mauritania posted a 9.5% increase in revenue last year.
"Maroc Telecom has done pretty well with its own operations in sub-Saharan Africa, so Etisalat's thinking seem to be that it should take advantage of Maroc Telecom's demonstrable expertise in that region," said Matthew Reed, principal analyst at Informa Telecoms and Media in Dubai.
Etisalat yesterday said it is selling Atlantique Telecom, its wholly owned West African subsidiary that has mobile operations in Central African Republic, Gabon, Ivory Coast, Niger and Togo, plus its Benin unit and separate regional information technology.
"Etisalat took on operations in quite difficult and competitive markets where there was probably also a language gap which may also have been a problem. Maroc Telecom seems to have cracked operating in Francophone West Africa whereas Etisalat hasn't, although Etisalat's Nigeria affiliate is doing well," Reed said. The Atlantique sale is dependent on Etisalat completing a deal to buy French conglomerate Vivendi's 53% stake in Maroc Telecom for 4.2bn euros.
Etisalat, which has operations in 15 countries in the Middle East, Asia and Africa, expects that transaction to be completed by the end of May.
The UAE firm initially bought 50% of Atlantique Telecom for 432mn dirhams ($117.6mn) in 2005, paying 419mn dirhams for a further 20% stake in 2007 before taking full ownership in 2010.
Etisalat does not break out its Atlantique business in financial results. The firm's African cluster, which also includes Tanzania and Sudan, made a net loss of 62mn dirhams in the third quarter of 2013, the latest set of published figures.
Etisalat took impairments of 71.7mn dirhams from Atlantique in 2013, while the subsidiary last year had borrowings of 1.64bn dirhams and capital expenditure of 1.19bn dirhams, according to Reuters calculations.
Etisalat did not give a rationale for the African deal in its statement yesterday.
In a March investor presentation, Etisalat said one of the reasons for buying into Maroc Telecom was its "in-depth knowledge of the African market and...particular experience of turning around incumbents".
Reuters
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