Out-Law News | 08 May 2014 | 9:49 am | 2 min. read
However the sale will only go ahead on condition that Etisalat's pre-agreed purchase of Paris-listed Vivendi's 53% shareholding in Maroc Telecom is concluded, Etisalat has said, in a deal which one legal expert described as an "intra-group transfer".
Maroc Telecom is to purchase Etisalat's shareholdings which operate under the Moov brand in Benin, the Central African Republic, Gabon, the Ivory Coast, Niger and Togo. The operations provide both mobile voice and data services. The share purchase agreement also includes Prestige Telecom, in the Ivory Coast, which provides IT services to Etisalat operations in the six countries.
"Closing of the transaction is subject to a number of conditions precedent," Etisalat said in its statement to the director general of the Abu Dhabi securities exchange. "These conditions include, among others, the closing of the acquisition by Etisalat of Vivendi's 53% shareholding in Maroc Telecom and securing competition and regulatory approvals in the above-mentioned 6 countries in West Africa."
According to Reuters, Etisalat agreed last November to buy Vivendi's holding in Maroc Telecom for $5.4 billion, plus a further $4.2 million in 2012 dividends from the Moroccan firm. The deal is part of Vivendi's strategy to focus on areas such as music and pay-TV and lower its debts. An unnamed Abu Dhabi state-owned fund is financing a quarter of the Vivendi holdings purchase according to Reuters.
Frédéric Ichay, of Pinsent Masons, the law firm behind Out-Law.com, highlighted the fact that Etisalat will sell its west African subsidiaries only on condition that it completes its planned purchase of Vivendi's share in Maroc Telecom.
"This is really an intra-group transfer, a restructuring in which Etisalat is getting money from its future indirect subsidiary," said Ichay. "Etisalat will get more than $650 million for the sale of its west African subsidiaries to Maroc Telecom – and it can spend that to cover part of its agreed purchase price of Vivendi's 53% shareholding in in Maroc Telecom."
"This kind of restructuring is not unusual but it is interesting to see that for Etisalat, its investment arm in west Africa is going to be Maroc Telecom," he said.
Ichay said that the deal reflects both Etisalat and Maroc Telecom's continuing strategy of investing in Africa, and that the deals reflect the highly active mobile technology market in west Africa at present.
"There is very strong growth in the mobile sector generally in west Africa," said Ichay. "We are seeing two main trends - from time to time governments are issuing new mobile licences and also we are seeing the privatisation of the historic incumbent telecoms provider."
"Mobile activity is much stronger than landline activity in west Africa because the area does not have a strong landline infrastructure," Ichay said. "There is also huge interest in the pre-paid mobile phones market, because companies get their money upfront."