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Du sets $273 million rights issue

(Reuters) / 19 April 2010

Dubai-based telecoms provider du will pursue a 1 billion dirham ($272.3 million) rights issue to fund infrastructure improvements beyond 2010, it said on Monday.

Chief Executive Officer Osman Sultan said during a call with reporters that the issue was already fully subscribed by its major shareholders and will meet the financial needs of the company for three to four years.

Du had previously said it has an investment programme exceeding 2.2 billion dirhams ($599 million) for 2010. Sultan said that the 1 billion dirhams rights issue would allow for financing beyond this year.

The company plans to increase high-tech services such as its broadband offering and 3G for mobile data but has no intention to build its own core infrastructure such as a fibre-optic network, which it shares with rival Etisalat.

“This does not come as a surprise given the major capital expenditure programme of the company,” said Simon Simonian, analyst at Shuaa Capital. “The company is investing in its mobile network and there is a definite need for capital.”

The capital would not be used for acquisitions and the company has no plans for international expansion, the CEO said.

“We have no plans to move outside the UAE in our core businesses of telecom,” Sultan said. “The timing and existing scene wouldn’t allow us to create the right value for our shareholders.”

But Sultan did not rule out the possibility of forming regional alliances that could help advance its peripheral businesses such as its Internet and social networking platforms.

Du shares were down 0.7 percent as Dubai’s main index eased 0.4 percent.

Sultan said the company is exploring the possibility of issuing public debt such as bonds or sukuks in the years ahead but said that bank financing was still its primary focus for raising capital. The company has expanded rapidly and claims a one-third market share since its launch three years ago.

Du said it aimed to achieve an investment-grade credit rating and access a range of funding sources.

“In light of this, the board concluded that an injection of equity would be a proactive first step in achieving this plan,” the company said in a statement.

Du broke Etisalat’s monopoly in 2007 and invested about 2.4 billion dirhams in its mobile, broadband and fixed network last year.

Du, also known as Emirates Integrated Telecommunications Company, is majority owned by the UAE’s federal sovereign wealth fund Emirates Investment Authority, Abu Dhabi’s Mubadala Development Company, and a division of Dubai Holding — who collectively hold around an 80 percent stake.

The company said the majority holders have backed the issue and would take up their rights in full.

Sultan added that the remaining 20 percent public stakeholders “will be treated equally and will exercise their full rights even before the founding shareholders”.


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