UAE's e& considers buying telecoms companies overseas to boost revenue

The UAE’s biggest telecoms operator e& is considering acquisitions of telecoms companies abroad to broaden its revenue base and is keen on buying businesses that complement and add value to its consumer business, its group chief executive said.

The Abu Dhabi-based company, formerly known as Etisalat, is pursuing a two-pronged strategy of expanding its telecoms asset base, and integrating emerging technologies and supporting the rapidly expanding start-up community, Hatem Dowidar told The National in an interview on the sidelines of Gitex Global.

“We're expanding both: in the telco space, which means buying other operators in other markets potentially, and also in the technology space, acquiring companies like Starzplay and elGrocer,” Mr Dowidar said, referring to the two consumer-focused companies that e& bought majority stakes in during the past year.

“We are looking at both sides of the coin. While we are a tech company … part of our activity is telecommunications, so we look at that [type of deals].”

The telecoms industry is going through a major transformation, especially with the advent of new technologies that telecoms operators are trying to integrate into their operations to expand consumer base and add new revenue lines amid intensifying competition.

Telecoms operators with strong balance sheets are increasingly seeking mergers and acquisitions to gain access to new markets and exchange expertise that could open up new markets.

M&A activity in the telecoms sector, however, slowed down in the first half of 2022, dropping by more than half to $41 billion from $88bn a year ago, according to consultancy Bain and Company.

The Europe, Middle East and Africa region accounted for the majority of global transaction value, at about 60 per cent in the first six months of the year, it said.

Etisalat, which in February was rebranded as e&, seeks to transform itself into a global technology investment conglomerate. The company, which currently has operations in 16 countries across the Middle East, Africa and Asia serving more than more than 156 million customers, has expanded abroad and solidified its stakes in overseas markets in recent quarters.

In May, the company acquired about 2.766 billion shares in UK-based Vodafone Group, representing 9.8 per cent of the latter's issued share capital, making e& its largest shareholder.

Last year, e& raised its ownership in Etisalat Investment North Africa (Eina) to 100 per cent, increasing the company's effective ownership in Morocco's Maroc Telecom Group to 53 per cent from 48.4 per cent.

Mr Dowidar did not say which countries or assets are on e&'s radar.

The partnerships and acquisitions the company has made were meant for “future business growth for the benefit of customers and offering long-term sustainable investment opportunities for investors”, he said.

Almost 10 per cent of e&'s revenue, or about Dh5bn ($1.36bn) a year, is being reinvested across the group to improve its networks and add new services, Mr Dowidar said.

He declined to say how much in dry powder e& has kept aside for acquisitions.

There is a “pipeline of projects in action”, and “more additions” to the company may be announced over the coming months, Mr Dowidar said, without disclosing further details.

The strategy of e& will significantly be complemented by the launch of a new $250 million venture capital fund that aims to support start-up companies.

The fund, which is part of the company's new investment unit, e& capital, adds to the slew of VC funds focused on the Middle East and is expected to raise the company's profile, Mr Dowidar said.

“By creating the ability for start-ups to get funding, they are able to scale, improve and compete in the region and elsewhere,” he said.

The fund will also look at start-ups from outside the UAE in order to encourage them to do business in the Emirates and contributor to the national economy.

“By supporting that ecosystem, [we] will also create very good financial returns for all investors,” Mr Dowidar said.

The company is also tapping into the metaverse with the unveiling of e& Universe, which is another building block in its strategy to become a global technology company.

Mr Dowidar declined to reveal the size of investment in e& Universe but said the company is already in discussions with “several” real estate companies to help them establish a presence in the company's metaverse.

The emerging technology, which allows interconnect in virtual worlds, has the ability to help companies streamline operations through interactive means.

“Companies will be using the metaverse a lot. More and more components will be coming into e&'s metaverse, such as entertainment events that are relevant to the region,” Mr Dowidar said.