UAE telco e&, formerly Etisalat, aims for Asia, Europe growth after overhaul

DUBAI, United Arab Emirates — The United Arab Emirates’ largest listed telecommunications provider Etisalat has rebranded to “e&” and announced a strategic restructure aimed at driving new investments and expanding international growth.

“We want to really up our game,” e& CEO Hatem Dowidar told CNBC in an exclusive interview. “We saw how the tech giants grew. We look now at their market caps and the returns they offer, and we feel jealous,” he said.

The restructure splits the telco into several new divisions. The telecom division, which operates in 16 markets and includes its Etisalat UAE business, will remain the same. New business verticals including “e& life” and “e& enterprise” will split its consumer and enterprise divisions, while a new vertical known as “e& capital” will serve as an investment arm to focus on joint ventures, acquisitions and startup investment opportunities.

“On whether the strategy makes sense, I believe the answer is yes,” Omar Maher, Director of telecom research at EFG-Hermes told CNBC.

“Telcos generally, not just Etisalat, need to move out of the traditional telco model and move up the value chain because they have been and continue to face significant competition from OTT (over the top) players, such as Google and Facebook, which are reaping all the benefits of an increasingly digitized world without paying a cent in the connectivity part of the equation,” he said.

Analysts at EFG-Hermes expect low-single-digit revenue growth and stable margins from e& in the year ahead. Maher also said the restructure could help to “crystallize the value of Etisalat’s assets as they carve them out and potentially have them listed as separate entities.” Dowidar didn’t rule out asset divestments or listings as part of future growth plans.

“When the businesses are ready, we will study whether we invite partners or we list any of these,” Dowidar said. “We can see in the future when they reach a certain level of maturity, some listings, whether for the division or some of the companies under the division, but they’ll all remain under the umbrella of e&,” he added.

The company has undertaken acquisitions in recent years, including cyber security firm Help AG, data center operator Khazna, and online retailer elGrocer. The company also moved into digital banking, launching a partnership deal for digital bank WIO earlier this year.

“It seems there will be a lot more going forward with the new structure in place,” Maher said.

The group said it plans to target yet-to-be-named countries and companies in Asia and Europe over the next 18 months to accelerate its growth, but stopped short of providing specific details.

“We’re looking primarily at the moment at markets that have geopolitical stability as well as a mature regulatory environment,” Dowidar said. “Even on the telco side, we want to create more diversification of sources of revenue and profit, as well as currency stability,” he added.

The expansion of services come despite a long running frustration over a ban on Whatsapp and Facetime calls in the UAE, rumored to be due to security concerns and efforts to protect revenues of the domestic duopoly of the state’s two telecom providers, E& and Du.

“With the size we have and the business we have, it’s not about protection,” Dowidar said. A decision to unblock Whatsapp voice and video calls rests with the regulator and not the telco.

“There are requirements, maybe they cannot meet the regulatory requirements,” Dowidar said.

“I have no idea,” he replied when asked if security was a key concern.

The UAE some restrictions lifted on work from home tools such as Zoom and Skype in 2020, but the most popular services remain blocked, meaning residents typically have to use fee-based services from telcos instead.

e& is one of the largest listed businesses in the UAE and one of the largest listed telcos in the Middle East by market capitalization. Consolidated full year net profit rose to 9.3 billion dirhams ($2.5 billion) in the 2021 financial year.