We all know about the UAE's enormous energy reserves which, according to a recent report by British oil company BP, could last another 92 years at current levels. But there is another great resource in the Emirates that I feel is currently being underexploited – etisalat, the national telecommunications giant.
Royalty payments from etisalat to the UAE Government are the second biggest contributor, after energy revenues, to the national coffers. This year etisalat will make a contribution of around Dh10 billion to the UAE budget.
Recent second-quarter figures gave the market experts a chance to update the prospects for etisalat, and they liked what they saw. The headline figure – a 37 per cent increase in profits to Dh5.11bn, which translated into an even stronger 58 per cent rise in earnings per share – was dramatic, and benefited from a one-off profit on the sale of etisalat's stake in its Saudi partner. But even without this profit injection, the analysts were happy with what they heard, and remained very positive on the company's prospects. Irfan Ellam of investment bank Al Mal, for example, reiterated his "outperform" rating on the company and set a target price of Dh26.34 for the shares, implying 31.7 per cent of upside in the stock.
Yet I believe there has to be an acceleration of strategy within etisalat if its full potential is to be realised. The company – 60 per cent owned by the federal government – is one of the few big groups on the UAE market that does not allow foreign investors to buy its shares. There have been indications to the investment community recently that this position is being re-considered, but now is the time to revisit these plans with some urgency.
If, as is expected following the entry of competitor du into the market last year, the level of government royalties is lowered in coming years, that will only serve to make etisalat a more attractive prospect for the international investment community. The company was the only UAE representative in a recent Financial Times list of the world's biggest corporations. With telecoms remaining one of the few bright sectors in gloomy world equity markets, global interest in the shares would be enormous.