Tags: Emirates, Take Over

Emirates Telecommunication Eyes Controlling Stake in Oman Telecommunications

By , Money Morning •

From Staff Reports

Dubai-based Emirates Telecommunication Corp., the third-largest Arab telecommunications company, said it is interested in buying a controlling stake in state-controlled Oman Telecommunications Co., also known as Omantel.

News of the possible interest from Emirates Telecom, more generally referred to as Etisalat, sent Omantel's stock up 10%, to a 21-month high, Reuters reported.

"Are we interested? I say yes," Jamal al-Jarwan, chief executive of Etisalat International Investments, told Reuters. "Oman is a growth market, and there are synergies for us in the Middle East."

In 2005, Omantel lost a large portion of its market share and customer base to rival Nawras. On Oct. 3, the Omani government said it would cut revenue royalties and shuffle management to prepare for a long-term investor such as Etisalat to step in. Since then, Omantel's stock has gained 31%.

Last week, the Middle East Economic Digest reported that the Omani government could sell as much as 19% (worth roughly $590 million) of the company.

Etisalat's coverage area reaches from Pakistan to Nigeria, but domestic cell phone customers account for more 60% of the company's revenue.

In the past three years, the company has spent more than $6.5 billion on foreign acquisitions. And those properties appear to be paying dividends, as the company reported a $1.5 billion profit in the first nine months of 2007. Overall revenue in the first nine months of the year reached approximately $4.17 billion. That represented an increase of 30%, the company said in a statement.

Neither Etisalat or Omantel are SEC registered, and therefore aren't available for U.S. investors to buy into. Even so, the strong growth is important because Dubai is a market that savvy U.S. investors are watching very closely.

"Dubai is one of the world's most sophisticated investors," and is investing heavily in Asia, with a special focus on China, says Keith Fitz-Gerald, a professional trader and Money Morning contributing editor who is a well-known Asia-investing expert.

Dubai is making investments throughout the world via its state-run investment fund, and through other investment vehicles - including a high-profile deal to buy into MGM Mirage (MGM), the U.S.-based gaming-and-hotel company. That deal alone should stand as proof that U.S. investors should closely watch Dubai's investment strategies - and even look to profit where possible, Fitz-Gerald said in a recent interview. [For our report detailing why Fitz-Gerald recommends MGM as low-risk play on China, please click here. The report is free of charge].

 

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