Khaleej Times, United Arab Emirates
June 23 2006
Etisalat close to $450m telecom deal in Armenia
BY ISAAC JOHN (Chief Business Reporter)
23 June 2006
DUBAI – UAE’s telecom giant Etisalat, on an aggressive overseas buying
spree spanning Europe, Africa and the Middle East, moved a step closer
to acquiring 90 per cent of ArmenTel, the largest Armenian operator of
cellular and fixed-line telephony, by getting short-listed yesterday
for the final bidding round along with three consortia.
Greek telecom provider OTE, which owns 90 per cent of ArmenTel,
said yesterday a consortium led by Etisalat is among the four bidders
short-listed from the original eight bidders, including major Russian
telecommunication conglomerates, Mobile Telesystems and Vympelkom.
The fourth bidder is a consortium comprising VTEL Holding and
Knightbridge Associates.
The Etisalat-led consortium includes Dubai investment house Istithmar
PJSC and Emergent Telecom Ventures.
When OTE announced its intention to sell 90 per cent of ArmenTel
shares in early April 2006, primary offers came from Russia’s Sistema,
Vympelkom, and Rostelekom, Kuwait’s MTS Kuwait, Armenia’s Sil group,
Belgium’s Belgacom, Hungary’s PanTel, and Etisalat.
ArmenTel provides service to 595,000 fixed telephone subscribers in
Armenia and controls over a half of cellular communication market,
serving more than 50,000 subscribers. Armenian government owns 10
per cent of Armentel. The company’s turnover reached Eur 110 million
in 2005.
According to sources close to OTE, the outcome of the tender would be
known after July 20. Experts estimated the value of 90 per cent of
ArmenTel shares around $200 million. However, indications are that
the asset value may surge with Russian companies expected to offer
$450 million for the Armenian operator.
Armenian sources said although Russian companies have more chances
to win the tender "because they have more contacts and connections
with Armenian officials, which is of great importance for working
in Armenia, for the government strictly controls Armenia’s telecom
market," Etisalat stands a better chance thanks to its financial
clout and track-record for efficiency. "However, it seems all but
certain that the company, in which the Armenian government has a 10
per cent share, will be sold to a Russian firm. Recent articles in
the Armenian Press speculate that the government will not tolerate
any other outcome. Certainly OTE’s experience in Armenia serves as
a warning to potential investors of the danger in going against the
authorities. OTE has spent several years fighting the government in
courts in London over its alleged failure to meet investment conditions
laid out in the 1997 agreement by which it first acquired Armentel,"
the sources pointed out.
Last week, a consortium led by Etisalat qualified for the final
auction round for Egypt’s third mobile licence scheduled for July 4.
The UAE telecom giant, which has finalised the $2.6 billion takeover
bid for Pakistan Telecommunication Company Ltd. two months ago, is
also bidding for a stake in Algerie Telecom, Algeria’s state-owned
telecom company, and is among the ten international companies that
have submitted bids for the 800 million euro acquisition of some 70
per cent of Mobi 63, Serbia’s largest mobile phone network. With all
these acquisitions, Etisalat’s overseas commitment is poised to exceed
$10 billion soon.
Istithmar forms part of The Corporate Office comprising Dubai’s
Ports Customs & Free Zone Corporation and Nakheel, one of the largest
developers in Dubai.