Etisalat takes $769 million charge on foreign units

REUTERS

DUBAI

ETISALAT, the United Arab Emirates’ biggest telecom operator, has written down the value of businesses in Pakistan and Sudan by a combined $769 million, blaming tough political and economic conditions and crimping quarterly profit growth.

The state-controlled firm operates in about 15 countries across the Middle East, Africa and Asia, having expanded into new markets in the last decade in an attempt to offset the impact of the launch of domestic rival du in 2007.

These acquisitions have provided mixed results, with Saudi Arabia affiliate Mobily 7020.SE among most analysts’ top regional picks, but Etisalat has found it much harder going in lower income markets outside the Gulf.

Last year, the Abu Dhabi firm wrote off the $827 million value of its Indian operation in its 2011 fourth-quarter results.

Of the latest 2.83 billion dirhams of impairments, 2.37 billion relate to Pakistani affiliate Pakistan Telecommunication Co Ltd (PTCL) and 459 million to Sudan fixed-lined operator Canar.

Etisalat said it took the impairments due to inflation and “challenging economic and political conditions as well as by the downtrend in real estate prices combined with negative local currency fluctuation”.

These impairments reduced Etisalat’s fourthquarter net profit to 854.3 million dirhams, according to Reuters calculations.

This compares with a profit of 704 million dirhams in the prior-year period when the company took the India write down.

One analyst at Bahrain’s Securities & Investment Co (SICO), who had not expected Etisalat’s new writedowns, forecast the operator would make a quarterly profit of 2.84 billion dirhams.

Etisalat’s 2012 net profit was 6.74 billion dirhams, up from 5.84 billion dirhams in 2011.

The firm reported rising profits in the second and third quarters, with the latter period boosted by the $510 million sale of a 9.1 percent stake in Indonesian affiliate PT XL Axiata.

These appeared to mark a turnaround for the company, which up to and including the first quarter of 2012 had posted falling profits in eight out of nine quarters, prompting Etisalat’s revamped management to focus on high growth or high population markets such as Egypt and Saudi Arabia as well as mounting a fight-back against domestic rival du.

Fourth-quarter revenue was 8.48 billion dirhams.

This compares to 8.23 billion dirhams a year ago.