UPDATE 3-Etisalat to pay Vivendi $5.7 bln for Maroc Telecom

Tue Nov 5, 2013 10:17am EST

* Etisalat to buy Vivendi's 53 pct stake in Maroc Telecom

* Maroc Telecom leading wireless carrier in Morocco

* Adds fast growing West African countries to its portfolio

* Sale to help Vivendi focus on media business

By Matt Smith

DUBAI, Nov 5 (Reuters) - Etisalat has agreed to buy Vivendi's 53 percent stake in Maroc Telecom for 4.2 billion euros ($5.7 billion), giving the Abu Dhabi company control over the largest wireless carrier in Morocco and a bigger footprint in sub-Saharan Africa.

The sale draws a line under months of negotiations as the debt-laden French conglomerate slims down and sells capital-intensive telecoms assets to focus on music and pay-TV businesses that it believes have greater growth potential.

The deal also marks a return to acquisitions for Etisalat following a pause to digest some problematic purchases, and gives the largest telecoms firm in the Gulf a top position in Morocco and access to Mauritania, Burkina Faso and Mali in addition to the African countries where it is already present.

Maroc Telecom's operations in West Africa, with the exception of Mauritania, performed strongly as mobile customer numbers grew between 11 and 33 percent during the first nine months of 2013. Etisalat's African operations made a net loss in the third quarter as subscriber numbers fell.

Gulf Arab telecom operators like Etisalat and its Qatar-based rival Ooredoo are on the prowl for businesses outside their relatively small and saturated home markets, where rising competition has pressured profitability.

The sale is subject to regulatory approvals and follows protracted negotiations following Etisalat's initial bid in January. Qatar's Ooredoo withdrew its offer in June.

Politics also played a crucial role in the decision, given the north African kingdom owns 30 percent of Maroc Telecom.

Etisalat had promised to make Maroc Telecom the flagship of its African operations and deploy Maroc Telecom executives throughout Africa, sources familiar with the deal said in April.

"The deal does make sense in that it tallies with Etisalat's goal of diversifying away from the UAE, while Maroc Telecom also is a good fit geographically," said Matthew Reed, principal analyst at Informa Telecoms and Media in Dubai.

RELIEF FOR VIVENDI

Confirmation of the deal comes as a relief to some Vivendi investors since the disposal is necessary for the group to continue its revamp by spinning off its struggling French telecoms unit SFR.

Etisalat will pay Vivendi 3.9 billion euros for the stake, plus a further 300 million euros in 2012 dividends from Maroc Telecom, according to separate statements from the buyer and seller on Tuesday. Vivendi said it expects the deal to be completed by early 2014.

Morocco is one of Africa's most developed telecom markets, with 120 percent mobile penetration, three fixed-line and mobile providers and some of the lowest broadband prices on the continent, according to consultants BuddeCom.

"Vivendi is selling a business that is ex-growth and has declining margins with a shareholder set-up that is quite complicated. I would say this was a good sale rather than a good purchase," said Conor O'Shea, head of media sector research at Kepler Capital Markets in Paris.

The Maroc deal will be Etisalat's first big purchase this decade after spending about $12.6 billion on foreign acquisitions from 2004 to 2009 that added little to its profits.

The United Arab Emirates' former monopoly already has operations in 15 countries in the Middle East, Asia and Africa, although its home market remains by far the most important, accounting for 65 percent of third-quarter revenue.

Analysts say Etisalat has made a poor return on many of its foreign units because it overpaid in some cases or bought minority stakes in small players in crowded markets like India.

The company has changed most of its senior management in recent years, recruiting foreign heads of marketing, finance and strategy, and the Maroc deal suggests it has learned from earlier mistakes.

"There seems to be a plan for Maroc to be the managing unit for all of Etisalat's sub-Saharan units, the idea being that Maroc has done pretty well in that region," Informa's Reed said, referring to Etisalat's operations in Ivory Coast, Benin, Togo, Gabon, Niger and the Central African Republic.

Vivendi's shares were up 0.1 percent at 1346 GMT, while Etisalat's rose 0.4 percent.

Lazard Ltd and Credit Agricole advised Vivendi, BNP Paribas advised Etisalat and Bank of America Merrill Lynch acted for Maroc Telecom. Moelis and Co advised state-owned Emirates Investment Authority, Etisalat's majority shareholder.

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