Foreign investors can now own shares in Etisalat

In an historic move, UAE Federal Law No. 01 of 1991 has been amended by Federal Decree by Law No. 03 of 2015, and new Articles of Association have been issued by the UAE Cabinet of Ministers. The amendments introduce momentous changes, including the possibility of foreign investors owning shares in Etisalat Group, while Etisalat’s legal name will change to Emirates Telecommunications Group Company PJSC, but will continue to be known as Etisalat Group.

These changes allow for legal persons, including institutions, in the UAE, or UAE government agencies, or other legal persons, to own shares in Etisalat. Also, non-national individuals and entities may own up to 20 percent of Etisalat Group’s shares, subject to the approval of the Etisalat Group Board of Directors. However, restrictions in respect of voting rights shall be applied to the shares owned by non-nationals and such shares shall not hold any voting rights at Etisalat Group’s general assembly although holders of such shares may attend general assembly meetings.

Commenting on the changes, Eissa Al Suwaidi, Chairman, Etisalat Group, said, "I wholeheartedly welcome the federal decree and praise the government for their leadership and support of the telecommunication sector. The approval to allow institutional and foreign ownership of Etisalat Group’s equity is another significant milestone in the history of Etisalat Group. It will have a positive impact for both Etisalat Group’s shareholders and the stock exchange. It also sends out a strong signal that the UAE is open for business and will enhance Etisalat brand recognition around the world."
   
In addition to ordinary shares, a ‘special share’ will be issued to the Federal Government of the UAE (the ‘special shareholder’), pursuant to the approval of Etisalat Group’s Board of Directors. Etisalat Group will also be entitled to issue different classes of shares. Other than the issuance of the special share, Etisalat Group does not intend to issue any additional shares at this time.

Ahmad Julfar, Group Chief Executive Officer, Etisalat, added, "This is a historical moment for Etisalat which will allow us to build on the years of success the company has enjoyed and provide additional impetus in our pursuit of excellence in all that we do. It will enable Etisalat to continue to invest in the innovative products and services which our customers demand and are vital in the highly competitive global telecommunications sector. As a result, I am confident that Etisalat will go from strength to strength and continue delivering long-term value to our shareholders."

Some of the other material changes include the ability for Etisalat Group to establish a new operating company for the purpose of operating its telecommunications network business and providing telecommunication services in the UAE, subject to special shareholder approval, and establishing a share buyback programme at any time in accordance with the conditions and procedures set out in the relevant law and subject to the prior approval of the Emirates Securities and Commodities Authority.

In accordance with the new law, Etisalat Group will carry out the procedures required to implement and align its status with the provisions of the new law within one year from the date of its issue.

No voting rights for foreign shareholders

Etisalat will not extend voting rights to foreign shareholders when the UAE’s telecom company opens up its shares to non-UAE investors, it said on Wednesday.

Etisalat is the largest listed UAE company by market value and worth nearly double the second-biggest firm, but its shares can only be owned by UAE nationals, and all institutions are excluded.

In June, Etisalat said it would loosen these rules to permit foreign and institutional investors on to its share register.

On Wednesday, it provided further details on these reforms after the UAE cabinet amended the firm's articles of association and a related federal law.

This will likely lead to Etisalat's inclusion in MSCI's emerging market index.

Non-UAE investors will be allowed to own up to 20 per cent of Etisalat's shares, the company reiterated on Wednesday, but will not be granted voting rights, a statement to Abu Dhabi's bourse said.

The UAE federal government, which owns 60 per cent of Etisalat through sovereign wealth fund Emirates Investment Authority, will be issued with a so-called "special share", the statement said.

This will grant it veto rights over "key decisions" relating to Etisalat.

These include changes to Etisalat's share capital, rights attached to shares, approval of a merger with another company, participation of a strategic investor and allowing the government's stake to fall below 51 per cent, the statement said.

Etisalat will also convert to a public joint stock company from a corporation and its formal name will be amended to Emirates Telecommunications Group Co from Emirates Telecommunications Corp.

It operates under the brand name Etisalat, which means telecoms in Arabic.

The company said it has one year from the amendment of the federal law to implement the agreed changes. Etisalat did not specify when the law was amended.





 

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