Fitch affirms Etisalat at ‘A+’ on Maroc Telecom acquisition announcement

Fitch Ratings has affirmed the UAE-based Etisalat’s ‘A+’ rating after its announcement that it has entered into an exclusive agreement with Morocco’s Vivendi. (File photo: Reuters)

Fitch Ratings has affirmed UAE-based state-owned Emirates Telecommunications Corporation’s (Etisalat) Long-term foreign currency Issuer Default Rating (IDR) at ‘A+’ with a Stable Outlook.

The affirmation follows the announcement that Etisalat has entered into an exclusive agreement with Vivendi (BBB/Stable) to acquire approximately 53% of the issued share capital and voting rights of Maroc Telecom from Vivendi for EUR3.9bn ($5.1bn). The announcement of exclusivity and final agreement is subject to the necessary government and regulatory approvals, which will take some months to process.

Maroc Telecom is a public listed company on both the Casablanca and Euronext - Paris stock exchanges. It is Morocco’s leading integrated telecoms operator with international operations in four other West Africa countries.

Diversification

Fitch believes Maroc Telecom represents a strategic fit with Etisalat’s wider portfolio of companies including its existing African footprint. The contribution of Maroc Telecom will marginally diversify Etisalat’s exposure to its domestic market, which has faced growing competitive pressure and weakening domestic group operating margins. However, the UAE continues to generate a substantial majority of group EBITDA.

Sovereign Linkage

Etisalat’s IDR is based on Fitch’s assessment of the sovereign’s creditworthiness, given Etisalat’s strong operational and strategic ties with the UAE. Etisalat is 60.03%-owned by the state, and it is stipulated by law that state ownership cannot fall below 60%. Fitch’s approach and top-down methodology takes into account the assumed government support in line with Fitch’s parent and subsidiary rating linkage methodology. Fitch views government support as integral to the company’s international expansion plans.

 

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