E& can absorb Dh7.78 billion offer for additional stake in Mobily

UAE telecom giant e&’s plan to increase its stake in Saudi telecom firm Mobily will not impact its credit quality because it can absorb the $2.12-billion (Dh7.78 billion) additional stake offer in Mobily, global ratings agency S&P said on Monday.

Tatjana Lescova, primary credit analyst at S&P, said the increase in stake will benefit e&, previously known as etisalat, from a bigger scale in a high-growth, although competitive, market, which will lead to some margin dilution.

“At the same time, this (additional stake) will lead to a growing contribution from Saudi Arabia compared with the currently dominant UAE market, which contributes about 60 per cent of operations. Given the relatively more competitive sector landscape in Saudi Arabia, this transaction would mean some dilution in profitability, but we expect the consolidated EBITDA margin to remain above 40 per cent,” said Lescova.

On March 16, e& made an offer to increase its stake in Etihad Etisalat (Mobily) to 50 per cent and one share from its current stake of 28 per cent. It offered a price of 47 riyals ($12.53; Dh46) per share.

Mobily reported 2021 revenue and EBITDA of Dh14.5 billion and Dh5.5 billion, respectively. E&’s consolidated revenues for the fiscal year 2021 amounted to Dh53.34 billion, a year-on-year increase of 3.2 per cent while consolidated profit attributable to the shareholders increased to Dh9.3 billion, an increase of 3.2 per cent.

The additional stake will add 20 to 25 per cent to e&’s revenues, taking consolidated pro forma revenue of close to Dh68 billion which will place the company well ahead of the other telecom operators in the GCC region, S&P said.

The Saudi telecom sector is competitive, with three main operators, of which government-owned Saudi Telecom controls more than 70 per cent of the market share by revenue. Mobily is the second-largest mobile operator in Saudi Arabia and is rolling out its 5G infrastructure.

With almost half of Saudi Arabia’s 34 million population under 30 and average GDP per capita of $23,000, the Kingdom is one of the largest and fastest-growing markets in the Gulf Cooperative Council (GCC) region.

S&P’s Lescova believes that E& has embarked on a more active growth strategy and may make more opportunistic acquisitions in both telecom and non-telecom after its recent rebranding.

— waheedabbas@khaleejtimes.com