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Etisalat Company Profile

Etisalat Company Profile

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Published by Carlos Valdecantos
mmC Group's company profile analysis. More info at www.group-mmc.com or www.consultantvalueadded.com
mmC Group's company profile analysis. More info at www.group-mmc.com or www.consultantvalueadded.com

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Categories:Types, Business/Law
Published by: Carlos Valdecantos on Jul 02, 2009
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04/09/2013

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mmC Group’s point of view on Etisalat’s profile and it’s International Expansion Strategy

Point of view June 2009

For further information please contact: Carlos Valdecantos (+34 696 940 221, cva@group-mmc.com) Fran González (+34 616 285 092, fjg@group-mmc.com)

mmC GROUP Strategy Consultants – Etisalat compnay profile – Jun2009

Page 1

Etisalat’s geographic footprint covers Middle East, Africa (through Atlantique Telecom and the “Moov” brand) and Asia.
PEER PROFILES > ETISALAT > GEOGRAPHIC FOOTPRINT

2008 Highlights Markets Subs Revenues EBITDA

18

80
Million

7.1
Billion $

4.7
Billion $

mmC GROUP Strategy Consultants – Etisalat compnay profile – Jun2009

Page 2

Etisalat is betting on high population markets with low penetration and not necessarily on leader position in the respective market.
PEER PROFILES > ETISALAT > SUMMARY OF INTERNATIONAL INVESTMENTS

Etisalat total subscribers, EoP

Subscribers Millions

27%

80 63

2007

2008

•  Source: Etisalat mmC GROUP Strategy Consultants – Etisalat compnay profile – Jun2009

Page 3

Etisalat’s revenues grow consistently at an average of 26% annually. The best EBITDA margin among all peers resulting from strong monopoly at home.
PEER PROFILES > ETISALAT > EVOLUTION OF MAIN FINANCIAL INDICATORS

Evolution of main financial indicators

Revenues CAGR: 26%
USD M 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 2004 2005 2006 2007 2008 931 1,159 2,841 2,203 1,582 78% 76% 77% 73% 5,811 66% 7,111 90% 80% 70% 60% 50% 40% 2,223 1,830 20% 10% 0% 30%

Revenues EBITDA Net Profit EBITDA % 3,503 2,670

4,435 3,428

4,723 4,218

*) Source: Etisalat Abu Dhabi Securities Exchange filings and annual reports

mmC GROUP Strategy Consultants – Etisalat compnay profile – Jun2009

Page 4

Etisalat’s growth intensifies in 2006. Bank debt is used only temporarily – assets are financed with equity and non-bank credit .
PEER PROFILES > ETISALAT > SOURCES OF FUNDS

Evolution of consolidated assets and net debt
USD (Mn)
Current assets Non-current assets
14,282 12,499 3,513 3,690 6,549 3,530 3,019 10,769 4,570 16,899

Sources of funds to finance expansion

+1,955 Current assets Total increase in assets +11,349

+751

Bank debt

+9,394

Non-current assets

Non-bank +5,068 Creditors and other liabilities +4,290 Equity and reserves +1,240 Minority interests

5,550 2,615 2,935

12,329 8,809

2004

2005

2006

2007

2008

Increase in total assets 2004 – ‘08

Incrase in liabilities and equity 2004 – ‘08

2,124

2,630

2,805

2,569

3,075

+ -

-1,901 Cash Net debt Debt

-1,396

-751

Key Highlights

Etisalat is probably the only large international telecom operator whose net debt is positive, i.e. it does not have debt.

1.  Etisalat maintains high and stable cash balance - $2 / $3B. Bank debt appears for the first time on the balance sheet in 2006. 2.  Etisalat’s shareholders are involved – equity supports much of the growth. 3.  Etisalat does not give details on the composition of the “creditors” account which forms a large part of the financing.

Source: Operator, mmC analysis. mmC GROUP Strategy Consultants – Etisalat compnay profile – Jun2009

Page 5

Etisalat has been present abroad since 1999 but astructured international expansion program developed only after 2005.
PEER PROFILES > ETISALAT > INTERNATIONAL EXPANSION

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

Etisalat (UAE), since 1976 Zantel (Tanzania)

Thuraya (international) Atlantique Telecom Not launched yet Individual investments

Thuraya (Satellite, Global) Mobily (KSA) PTCL / Ufone / Vfone (Pakistan) Canar (Sudan) Atnlantique - Moov (Benin) Atnlantique - Moov (Burkina Faso) Atnlantique - Moov (Togo) Atnlantique - Moov (Niger) Atnlantique - Moov (CAR) Atnlantique - Moov (Gabon) Atnlantique - Moov (Ivory Coast) Etisalat Misr (Egypt) Etisalat (EMTS) (Nigeria) Excelcomindo (Indonesia) Etisalat (Afghanistan) Etisalat (Swan) (India) Etisalat (Iran) Iran: Operations not launched yet. Bayanat Al Oula (KSA) Zajel Int’l (KSA)

Internet and data operators only.

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

1) The beginning or each operation corresponds to the effective operation launch, rather than obtaining the licence.

mmC GROUP Strategy Consultants – Etisalat compnay profile – Jun2009

Page 6

If there is room for growth, Etisalat is ready to enter. The company feels confident it will be able to capture its share of the mobile market.
PEER PROFILES > ETISALAT > INTERNATIONAL EXPANSION STRATEGY

1.  Etisalat makes its first bold acquisitions starting in 2005, yet international growth has always been a part of the corporate culture. 2.  Etisalat builds a portfolio of international companies to last, i.e. not “operate and resell” model. 3.  Etisalat chooses markets carefully, so there is enough room for growth. 1.  Etisalat does not necessarily look for market leadership or first entrant position. Often it will enter in the 4th, 5th even 6th position (e.g. Iran). 2.  Its stated market selection strategy is “low penetration / high population.” 3.  The company’s managers seem confident that if there is enough room for growth, Etisalat will be able to capture its share of the market. 4.  Etisalat bought a group of operators under the umbrella of Atlantique Telecom – which boasts 7 licenses in the West of Africa. Later all were rebranded to “Moov”. 5.  From a geographical perspective Etisalat’s domain is Africa, Middle East and Asia. 6.  Etisalat’s shareholders are involved – almost 40% of the growth in the last 5 years has been financed with equity.

mmC GROUP Strategy Consultants – Etisalat compnay profile – Jun2009

Page 7

Etisalat’s large geographical footprint provides good expectations for future growth.
PEER PROFILES > ETISALAT > INTERNATIONAL EXPANSION STRATEGY ASSESSMENT

Pros •  Its deep experience allows Etisalat to enter new operations without losing the focus on existing operations •  Entering growth markets with low penetration and high populations, ensures there is enough room for growth. •  Geographic dispersion reduces risks of regional downturn/instability affecting group results. •  Gradual acquisition of international assets ensures the smooth integration without shocks. •  Can use presence in low-stake markets to develop products and services whose model if successful can be replicated in UAE.

Cons •  Etisalat plays in markets with high numbers of competitors reduces the profitability of the operation •  At the same time, entering into growth markets in developing countries without looking for market leadership could weigh down on profitability due to low ARPUs •  There is no brand strategy or Group-level approach in the operations •  The high level of geographic disparity could affect markets’ understanding and difficult operations management. •  Still a small part of Etisalat’s revenues originate abroad.

Options for the future 1.  Grow its international investments, so they contribute more to the group results. 2.  Consolidate its position in relevant markets through acquisition of competitors in markets with high competition i.e. Iran 3.  Extract synnergies from its many operations.

mmC GROUP Strategy Consultants – Etisalat compnay profile – Jun2009

Page 8

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