Political upheaval can create uncertainty for telecoms operators but Etisalat and Zain have managed to make some of their own. In some countries, such as Tunisia, upheaval in the telecoms industry threatens to flow directly from recent political turmoil. Meanwhile the on-off nature of the Etisalat/Zain merger over the last week shows telecoms operators can also throw events into doubt by themselves. Now Etisalat has finally given up on the deal.
Earlier this month Reuters reported that Investec, the 51-per-cent shareholder in Orange Tunisia, may be forced by the country’s new government to give up its stake. Investec is a vehicle of Group Mabrouk, which is run by Marwan Mabrouk, the son-in-law of ousted President Zine El Abidine. Two weeks ago there was speculation that the government could itself buy Investec’s controlling stake in the operator.
The remaining 49 percent in Orange Tunisia is held by France Telecom and does not appear to be under threat of compulsory purchase. Conceivably, the French operator might even have the opportunity to grow its stake as a result of the shakeout. Even so, it’s a big turnaround since Orange Tunisia launched services in May last year. At the time, then-chairman of France Telecom, Didier Lombard, said Orange was “proud to associate itself” with Marwan Mabrouk. “I have full confidence in this kind of partnership, which brings together a strong local actor with a global operator”. Now a controlling stake in that partnership is up in the air.
Other mobile markets in the region might also face similar upheaval as business groups aligned with unpopular regimes are displaced. In such situations, some operators have moved to head off any problems before they can develop. No wonder Vodafone and France Telecom’s Mobinil in Egypt were so eager last month to tell the world (and the country’s political opposition) that they were forced to send out pro-government text messages to users. Better such a public statement than appearing to act voluntarily in the face of pressure, with the danger of being seen implicitly to take sides. That might have a potential downside for an operator later on in the political process.
Uncertainty is also breaking out in the telecoms markets of those Middle Eastern countries which appear most stable. And it’s nothing to do with politics, at least not of the kind we have seen recently elsewhere in the region. Etisalat of the United Arab Emirates, which incidentally is the third-largest operator in Egypt, appeared to be on course to buy a 46 percent stake in Kuwaiti operator Zain. Then the deal appeared to flounder following reports last week that a major Zain shareholder, the Kharafi family, has turned against it. Zain has been unable to find a buyer for its stake in an operator in Saudi Arabia where Etisalat is also present. In January, Zain announced a contingency plan in the event of the Etisalat deal falling through. The contingency plan evolves expansion in emerging markets, with the company expressing a preference for acquiring existing operators over green-field opportunities. Zain’s current interests in the Middle East include controlling stakes or minority interests in licences in Bahrain, Jordan, Kuwait, Lebanon and Saudi Arabia. The company pointed to “the Far East, Indian subcontinent, East Europe and Lebanon” as possible markets where it could add to its footprint. It might need that plan now. Or perhaps Zain might attract another suitor. Among the factors cited by Etisalat for the deal’s failure was “current political unrest in the region”. Shareholder disagreements did not help either. Uncertainty in Middle Eastern telecoms needs not come just from demonstrators on the street.
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