DUBAI: Etisalat has signed a €3.15bn ($4.36bn) facility to fund its purchase of Maroc Telecom, opting to borrow rather than use cash to exploit low interest rates and maintain dividend levels, its CFO said.
The Gulf’s No. 2 telecom operator by market value expects to conclude its first major acquisition of the decade by the end of May, having agreed to pay €4.2bn for Paris-listed Vivendi’s 53 percent stake in Maroc Telecom.
Etisalat opted to borrow to fund the acquisition despite having a net cash balance of Dh13.3bn ($3.62bn) as of the end of March.
“The cost of debt is very low so we thought it would be wise for Etisalat to leverage the balance sheet to optimise the capital structure,” Serkan Okandan, Etisalat’s Chief Financial Officer, said.
He said such borrowing would also enable Etisalat, which posted an 11 percent rise in first-quarter profit on Sunday, to maintain dividends around current levels. It paid Dh0.35 per share for the second half of 2013.
The new facility consists of a €2.1bn one-year bridge loan, priced at Euribor plus 45 basis points for the first six months. This then increases by 15 bps in each of the following three months, it said in a bourse statement yesterday.
The second part is a €1.05bn three-year loan priced at 87 basis points above Euribor.
Although Etisalat priced the loans in euros, they can also be utilised in dollars, the statement said, adding 17 local, regional and international banks were financing the facility.
On Sunday, it was reported that an Abu Dhabi state-owned fund would finance a quarter of Etisalat’s purchase of the Maroc Telecom stake, thereby reducing Etisalat’s contribution to €3.15bn.
“We cannot comment for the moment,” said Okandan when asked to confirm the role of the Abu Dhabi fund.
Morocco’s takeover rules require Etisalat to make a buyout offer for Maroc Telecom’s minority shareholders - the government owns 30 percent, with the remaining 17 percent of the company openly traded on the stock exchange. The price per share could be different to that agreed with Vivendi, analysts have said. Reuters
