Maroc Telecom bidders defy unrest in $6 bln sale

Wed Jan 23, 2013 4:09pm IST

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(The author is a Reuters Breakingviews columnist. The opinions expressed are her own)

By Una Galani

DUBAI, Jan 23 (Reuters Breakingviews) - Politics will play a major part in the sale of Maroc Telecom (IAM.CS). Vivendi (VIV.PA), the French media and telecom conglomerate, is in shrinking mode. It hasn’t had any trouble drumming up interest from far-flung corners of the world for its 53 percent stake in the listed North African telecoms operator. Qatar Telecom QTEL.QA, the UAE’s Etisalat ETEL.AD and South Korea’s KT Corp (030200.KS), have all submitted expressions of interest. And France Telecom FTE.PA is also keeping an eye on the sale.

Maroc Telecom offers a rare chance to take control of a leading operator in the region, but it is also a large and pricey acquisition. Any bidder would have to stump up as much as 6 billion euros ($7.9 billion) after extending the offer to minority shareholders, assuming the government of Morocco will want to hold onto its 30 percent. At six times earnings before interest, taxes, depreciation and amortisation, the operator trades at a 20 percent premium to its peers in the region.

Although Maroc Telecom has suffered fierce competition in its home market, which accounts for 80 percent of its revenue, the operator generates cash, and boasts a 56 percent EBITDA margin. Pricing pressure is expected to ease next year and there’s room for growth in broadband and mobile data. Nor is there any sign yet of a slowdown in spite of rising political instability in Maroc’s high-growth international markets, which include Mali and Mauritania.

The Moroccan government will have to approve of any buyer. Given historical country ties, Rabat would probably prefer a deal that would see the backbone of its telecoms network end up with France Telecom. But that would require a near-simultaneous sale of the French operator’s controlling stake in Morocco’s number two player, Meditel. Faced with financial challenges of its own, France Telecom may decide not to embark on such a complex deal.

That makes the Arab bidders the favourites. Rabat has kept its distance from the Gulf in the past, but Morocco is now hoping its fellow monarchies will support its economy, which is heavily exposed to the euro zone. The purchase of Maroc Telecom would make Qatar Telecom’s footprint in the Maghreb almost complete. And for Etisalat, a successful bid would mark a return to acquisitions after a three-year hiatus.

With so many politically-acceptable bidders, Vivendi shouldn’t have too much trouble closing a sale.

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CONTEXT NEWS

- Etisalat, the United Arab Emirates' incumbent telecom operator, on Jan. 17 said it had submitted a "preliminary expression of interest" for Vivendi's 53 percent stake in Maroc Telecom.

- Qatar Telecom has submitted a non-binding indicative offer for the Moroccan operator and is being advised by JPMorgan Chase, according to a person familiar with the situation.

- South Korean telecommunications firm KT Corp has also submitted a letter of intent to buy at stake in Maroc Telecom, a spokeswoman for the company said in December.

- A bid for Vivendi’s stake would trigger a mandatory offer to minority shareholders including the Moroccan government’s stake of 30 percent.

- There is no official deadline set for offers, but Vivendi hopes to sign a deal before the end of the first quarter of 2013, one source told Reuters in October.

- France Telecom owns a 40 percent stake in Morocco’s second-biggest operator Meditel.

- Maroc Telecom has a market capitalisation of $11.3 billion.

- Reuters: Etisalat eyes Vivendi's $5.8 bln Maroc Tel stake [ID:nL6N0AM7E7] - For previous columns by the author, Reuters customers can click on [GALANI/]

(Editing by Pierre Briançon and David Evans)

((una.galani@thomsonreuters.com))

((Reuters messaging: una.galani.thomsonreuters.com@reuters.net)) Keywords: BREAKINGVIEWS MAROC/

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