Posts Tagged ‘Middle East’

Dubai debacle & housekeeping

First off hello, I’m back blogging after a hiatus on here, has been a very busy 6 weeks or so since my last post, as have been blasted by a few things, not least amongst them getting Emerging Voice into shape.

So, a quick look around the blogosphere today has shown that markets have attempted to throw off the Dubai Debacle, but it would seem that not everyone has got the message. Some of the best from the last few days include :

Junior Deputy Accountant (comes with language warning) where Adrienne shares her usual eclectic mix with us : It’s a miracle ! The Bailout Will Save us All

The lovely Lynn Berman over at MarketNut gives us a pull down from the main & not so mainstream sites : Dubai Update

The hive mind of Emerging Voice has a myriad of offerings : Contagion to Tower of Babylon

& Josh over at Reformed Broker brings his own brain to focus on the topic : Dubai World & Bear Stearns : Coal Mine Canaries?

there has been plenty of sniggering & much joking about exchanging an island for a goat, but we leave you with this sobering picture


Reblog this post [with Zemanta]
Advertisements

MTN-Bharti : a long winding road from India to South Africa

bharti-airtel-mtn-mergerIndia’s Bharti Airtel & South African operator MTN returned to the bargaining table this week, over a merger that could create a $20 billion mobile giant. The potential deal is attractive for both parties & if successful, would create a leading telecommunications service provider group aligning Bharti’s market leading Indian business with MTN’s market leading African and Middle Eastern operations. Combined operations would result in the group enjoying leading positions in three of the fastest growing wireless emerging markets ; India, Africa & the Middle East, with no overlapping footprint & subscriber base of circa 200 million.

Under the terms of the deal Bharti will acquire a 49% shareholding in MTN, in turn MTN and its shareholders would acquire a 36% percent economic interest in Bharti, of which 25% would be held by MTN, the remainder held directly by MTN shareholders, with the long term goal being a fully merger. The two companies have agreed to continue exlusive discussions until the end of July, at which time any issues will be resolved or other potential partners will be engaged.

Sunil Bharti Mittal, Chairman and Managing Director of Bharti, said “We are delighted at the prospect of developing a partnership with MTN to create an emerging market telecom powerhouse. Both companies would stand to gain significant benefits from sharing each other’s best practices in addition to savings emanating from enhanced scale. We see real power in the combination and we will work hard to unleash it for all our shareholders.”

“The rationale for this potential transaction between MTN and Bharti is highly compelling,” said Phuthuma Nhleko, CEO of MTN. “We are excited at the prospect of teaming up with Bharti, India’s number one wireless operator and one of the most strongly capitalised players amongst its emerging market peer group. This would create a highly visible commercial partnership between South Africa and India,”

Bharti & MTN have been here before, almost exactly a year ago. Previous talks were torpedoed by a lack of clear understanding on control between the two companies. At the last minute, MTN proposed a different structure where Bharti was to become a subsidiary of MTN. Bharti retreated from the deal on the basis that it felt MTNs position was a way of gaining indirect control of the combined entity, which would have compromised the minority shareholders of Bharti. This time round it has been made clear from the start that Bharti will be the primary vehicle for both Bharti and MTN to pursue further expansion in India and Asia while MTN would be the primary vehicle for both Bharti and MTN to pursue further expansion in Africa and the Middle East. Most importantly, Bharti would have substantial participatory and governance rights in MTN enabling it to fully consolidate the accounts of MTN.

When this was announced earlier this week, I decided to hold off on posting, as I wanted to see what would forthcoming once the dust had settled & also to get a better feel for some of the more convoluted relationships involved. One of the potential major hurdles to this deal from my perspective was the stance of Singapore Telecom (SingTel) which owns a 30% stake in Bharti Airtel. Bloomberg reported that SingTel would end up with a diluted position of 20% at the end of any full merger between the two. However it would seem that this could be offset by synergies across all of the combined networks of Bharti, MTN & SingTel. In addition to its strong domestic business, SingTel owns Australian carrier SingTel Optus & holds significant stakes in carriers in Bangladesh, Indonesia, Pakistan, Thailand, and the Philippines, commanding upwards of 290 million subscribers themselves. In the same Bloomberg report, SingTel spokesman Peter Heng states that “SingTel will remain a significant shareholder and strategic partner in Bharti post any successful transaction. We will continue to equity account for Bharti, in its enlarged form post the transaction if this is successful.”

Another potential challenge that was aired, is opposition by minority shareholders in MTN, however it has been reported today that the Mikati family which owns a 10% stake in MTN via the M1 Group, has said it will back the deal. The majority shareholder in MTN is South Africa’s state pension fund PIC, with a holding of 13.5%, to date there has been no statement from them. Other minority shareholders of MTN include Allan Gray, Polaris, Coronation and Stanlib, it would seem that these companies are not so bullish on the deal, at least not until further details come clear.

The South African press also gave some weight to the position of the highly politicised trade union federation COSATU (Congress of South African Trade Unions) which recently tried to scupper the full takeover of Telkom’s stake in Vodacom by Vodafone. However, COSATU spokesman, Mr Patrick Craven, has said the MTN deal was a different situation to that of the national carrier ;  “Telkom has always been 50% owned by the public & the move was part of our policy agenda against privatisation. MTN has always been a private company”

So it would seem that conditions are favourable to the potential transaction going forward, which would bring to fruition a long held ambition for Bharti to move into Africa, which remains the most underdeveloped of emerging markets regards telecoms. By leveraging across the combined networks of Bharti Airtel, MTN, SingTel & the Bridge Alliance (11 major operatots in Asia-Pac), the new Bharti-MTN will become a major powerhouse & definitely a very attractive investment for those involved in Global & Emerging Markets.

Reblog this post [with Zemanta]

Total continues emerging markets investment & expansion

total-oil-logo1Total SA (NYSE – TOT), France’s largest company, announced the highest annual net profit in French corporate history last week, sounding a rare positive note in todays grim financial meltdown. In 2008 the firm made a profit of  €13.9 Bn ($18.0 Bn) thanks to record oil prices in the first half of the year, which helped offset the second half collapse in oil prices. Profits began to fall in the fourth quarter of 2008 as the credit crunch hit demand, sending crude prices tumbling. Total is now preparing for the future by investing in increased capacity in new fields, especially in Africa & the Middle East, whilst putting the brakes on production in Canada & the North Sea.

“Unprecedented volatility marked the 2008 market environment,” said Total chief executive Christophe de Margerie, noting that oil had peaked at about $150 a barrel last year before plunging to as low as $35

With regards to its North Sea operations, Total has reviewed its capital expenditure for 2009 due to the fall in oil prices. Senior vice president for Northern Europe, Michel Contie, remarked that an oil price of $40 per barrel was required to realistically develop new fields in the North Sea, as many new offshore discoveries are “not economic today.”  The Joslyn & Surmont heavy-oil ventures in the Canadian Athabasca project are among the “building blocks” for boosting output from 2016, the oil sands projects are expected to provide Total with almost 300,000 barrels a day of production capacity by 2020, as reported by Bloomberg : Total is “reevaluating costs, technologies, structure and timing of Canadian projects”

In a recent aggressive move, Total has offered to buy Canadian oil-sands explorer UTS Energy Corp for $ 617 million Canadian ($505 million), which rejected the bid as “inadequate.”  UTS has advised shareholders that the bid should be rejected, as the book value of the company is pegged at twice the unsolicited offer. Total reiterated today that oil sands need crude prices at $80 a barrel for investment, which to my mind displays that they are looking to bank up potential reserves for a time when oil demand will flip to the upside. Until then, Total looks as though it is banking on emerging markets to provide the spur to growth for the forseeable future.

In Nigeria, Total is the lead company in the Apko offshore oil field, where it is partnered with MSV’s favourite oil firm, Petrobras (NYSE – PBR) & state-owned Nigeria National Petroleum Corporation, the field is estimated to have reserves of up to 1.6 billion barrels of sweet crude in reserve. In order to help fund the project, the three existing shareholders agreed to auction off a 45% stake in the field to Indias state controlled ONGC for an estimated $2 Bn.

In Yemen, Total will soon start shipping liquefied natural gas from the Gulf of Aden, bringing into operation a $4 billion project begun less than four years ago. The shipments will make Yemen the newest member of the world’s small club of gas exporters & should earn the government as much as $50 billion in tax revenue over the next 25 years.

In Angola, as discussed in a previous post, Total is set to continue with a $9 billion investment to raise production, despite the huge drop in crude prices since July last year. In a joint venture with Chevron (NYSE – CVX) & others, the Tombua-Landana oil field is expected to come online, contributing a further 120,000 bpd to Totals existing operations. Meanwhile, Total’s third production hub in Angola’s offshore Bloc 17, is expected to begin pumping oil from depths of up to 1,200 metres,beginning in 2011, according to the company’s website. Presently, Total is the third biggest oil producer in Angola after Exxon & Chevron, pumping over 500,000 barrels per day.

During his presentation lat week, CEO  de Margerie stated that Total is also interested in entering the upstream sector in Brazil, particlualrly in offshore projects such as the Santos basin and is also eying new acreage in Venezuela.

“We have had discussions with Petrobras and told them officially that we would be interested either in entering existing discoveries or taking part in the next bids on new acreage,” de Margerie told reporters at a briefing in London.

He stressed that Petrobras needed financing to develop the reserves in the offshore basin, but that Total was not interested in merely becoming a financial partner in Brazil. De Margerie also said Total would be interested in bidding for new exploration acreage in the extra heavy crude oil Orinoco Belt in Venezuela.

“There is room for additional development  & we will be one of the companies to get access to the bid data, and we may bid,” he said. “We need to operate in Venezuela in good conditions, but it is an important target in terms of acreage” .

De Margerie said Total was right to stay in Venezuela despite the nationalization by President Hugo Chavez of large swathes of the country’s oil industry in 2007. Chavez nationalized oil fields when crude prices were on what looked like an unstoppable bull run, and as a result ExxonMobil and ConocoPhillips left Venezuela and are still runiing legal battles over disputed projects. It was reported earlier this year that Venezuela is now looking for new bids to develop fields from both global majors and state-run oil companies. Total which saw its stake in the Sincor project reduced from 47% to 30.3% in Chavez’s ambitious move remains committed to the project.

“We have to make sure our existing Sincor project delivers–this is still a real challenge,” he said.

Looking at Total from an independent viewpoint, it is obvious the management are playing a canny game. We have seen them exit or scale down high cost projects, such as Saudi Arabia, UK & Canada, whilst at the same time, investing heavily in emerging market prospects, as is clear from this article. What also impresses me about this company is its track record of working well with IOCs such as Chevron as well as local state entities & as long as it continues with this “nimble” approach along with a prudent focus on legacy operations, the future looks very bright indeed.

Qatar to continue double digit growth as LNG buoys economy

qatar_gas1_full

As the financial crisis continues to reach around the globe leaving most economies reeling in its wake, the Gulf state of Qatar is hoping that its substantial natural gas reserves will cushion it from the worst of the fallout. While other gulf economies face slowing growth rates, Qatar hopes that its vast gas reserves will allow it to weather the storm more easily than its regional neighbours.

“Selling gas gives a much better outlook for Qatar than the rest of the GCC countries,” says Philippe Dauba-Pantanacce, a senior economist at Standard Chartered Bank. “They have been doing a lot of heavy investments in terms of gas production, and they are yielding the benefits now.”

Qatar boasts the third largest gas reserves in the world after Russia and Iran, and is the world’s largest exporter of liquified natural gas (LNG). Experts predict that Qatar’s economy could grow by more than 10% in 2009, bolstered by projected strong expansion of gas exports and assisted by a potential drop in inflation. Such growth seems particularly remarkable when one considers that GDP growth in the United Arab Emirates,  is projected to dip under 3%.

“Qatar’s economic growth will be the strongest in the region by some margin,” insists Simon Williams, HSBC’s chief Middle East economist. “The industrialisation process in Qatar is advanced, the infrastructure build-out programme has momentum, and financing is secured for many of the key projects.”

This growth is expected to help Qatar push forward with in excess of $222bn worth of projects, as it strives to move away from its dependency on energy and become a ‘knowledge’ economy.

While the oil price collapse has weighed heavily on other Gulf states partially dependant on oil exports for their revenues, economists say the slide will have no impact on Qatar’s gas exports, which are based on long-term, locked-in price contracts. Most of its growing LNG exports are sold on long-term contracts, many linked to a lower reference oil price than currently projected for 2009, and are thus not expected to be adversely affected by the current slump in oil prices, according to analysts. With new LNG facilities scheduled to come on stream from producers RasGas and QatarGas, Qatar’s aim is to more than double its production capacity of 77 million tonnes per year by 2010.

Qatar is expected to print the strongest GCC current account surplus in 2009, above 30% of GDP. The recently completed $5Bn Dolphin Project, a good example of a “cash cow” project for the island nation, has now started pumping gas from Qatar to the UAE via an undersea pipeline.  The UAE has the fastest growing gas demand in the Middle East due to a rapid expansion in power and industrial projects and its gradual switch to gas as a cleaner source of energy. From around 21.2 billion cubic metres in 2000, the UAE’s gas demand surged to 34.1 billion cubic metres in 2005 and is projected to soar to 42.9 billion cubic metres in 2010, to 51.9 billion cubic metres in 2015 and nearly 63.2 billion cubic metres in 2020, according to the Ministry of Energy. Qatar’s North Field is the centrepiece of this project, with the pipeline carrying up to 30 million cubic metres of natural gas per day from Qatar to the UAE for a period of 25 years.

“In terms of top-line economic performance, Qatar is going to be one of the most strongly performing economies around the world next year,” says Robin Bew, editorial director and chief economist at the Economist Intelligence Unit. “But it’s important to point out that doesn’t mean it has dodged the economic bullet.”

“In terms of revenues coming into the economy, they are going to see a relatively more stable revenue base and that should help them going forward,” says Robert McKinnon, managing director of research at Al Mal Capital. “So they should be able to continue a lot of their infrastructure spend, and in terms of the GCC it would be probably the safest place to invest in the coming year.”

While global oil producers are contemplating ways to prop up crude prices, it would seem that gas producers don’t share the same agenda, for now. Gas and LNG are globally traded on 25-year, long-term take-or-pay contracts driven by a formula, wheras oil is traded on spot contracts. Major gas exporters have met informally for several years at the annual Gas Exporting Countries Forum, a group which includes Russia, Iran, Qatar, Venezuela, Nigeria, Algeria, Egypt, Indonesia and Libya, as reported by Graham Stack in his East of Europe blog.  However Iran is pressing for a formation of an OPEC-like gas cartel to set global prices, whereas Qatar & Russia seem to be more concerned with “reaching strategic understandings” on export volumes, schedules of deliveries, and the construction of new pipelines. They also plan to jointly explore and develop gas fields and coordinate start-ups and production schedules.

Saudi Telecom unveils $10B warchest

KUWAIT-SAUDI-TELECOM

State owned fixed line monopoly Saudi Telecom (STC) unveiled a $10b facility, which will be used to take part in a number of Middle Eastern license acquisitions which are due to be launched in 2009.

“”We can do SR40bn of acquisitions in the next few years. We have no problems with doing that at all”” Khalid al-Ghurair, Saudi Telecom Mobile  has SR40bn ($10.7bn) available for the acquisition of new licences and stakes in other operators, Khalid al-Ghurair, general manager for financial planning and budgeting at the company, tells.

In January, Bahrain and Iran will award new licences or management contracts. Tunis has set a deadline of 5 May for bids for a new telecoms licence, and Algeria, Morocco and Iraq have also committed themselves to auctions. In addition, Lebanon is planning to issue management contracts for two mobile telecoms networks before the end of the year, and Jordan is also planning to auction its first 3G network in 2009. The number of licences on offer means that regional operators will be under pressure to find funding to take advantage of as many of the growth opportunities as possible.

STC is pretty much a late comer to the international market, its hand being forced when its mobile monopoly was broken in 2005. It lost its mobile service monopoly to Etihad Etisalat (Mobily) in 2005, while a consortium led by Kuwait’s Mobile Telecommunications Co (Zain). made the highest bid for a third mobile license in March, offering $6.11 billion. Mobily was able to capture 30 percent of the market within 18 months of starting operations.

In response, STC made some acquisition plays in 2007 , when it acquired a 25 % stake in Malaysia’s Maxis and 26 % of Kuwait’s third mobile licence. Earlier this year, STC acquired a 35% stake in Saudi based Oger Telecom, which brought interests in Turkey (Turk Telekom / Avea) & South Africa (CellC). Further regional acquisitions will probably remain at the same level, STC seems comfortable with taking non-controlling stakes & spreading it’s exposure.

“”We could have gone for majority with Maxis, majority with Kuwait and majority with Oger Telecom, but we are very cautious,”” says Al-Ghurair. “”We are not risk takers.”” In total, Saudi Telecom spent SR24.5bn on the three international deals. It has built up debt of 1.3 times its earnings before interest, tax, depreciation and amortisation (ebitda), partly through the acquisitions, according to Standard & Poor’s.

 

STC has enjoyed monopoly status regards fixed line, up until this year, regulators have now opened the market & there are three new players planning to launch services in 2009. The Optical Communications Company (OCC) is a joint venture between local partners, Verizon (NYSE – VZ) & MSV favourite Millicom International, with other franchises being put together by Hong Kong’s PCCW  (HK – 0008) & regional player Batelco (Bahrain Telecom). The Kingdom remains a strong growth opportunity for fixed line operations as less than 17% of the population currently enjoy fixed services & internet penetration remains at circa 4%.

Verizon has just announced that it will be investing $3B into the OCC joint venture, whilst the PCCW consortium has failed to raise cash via an IPO as expected, due to poor market conditions. Part of the pre-requisite for any of the deals is for the Saudi state pension fund to take a 5% stake, which until now it has demurred to do.

STC received good ratings earlier this  year, Standard & Poor’s Ratings Services assigned STC with ‘A+’ long-term and ‘A-1’ short-term foreign currency corporate credit ratings. Moody’s Investors Services assigned A1 long term local and foreign currency issuer ratings, which will obviously help buoy shareholder confidence & also help in capital markets for the upcoming licensing round. Local competitors such as Zain, have exhausted themselves financially with recent rapid growth in Asian & African markets, which should allow STC to make some real penetration in 2009.

The main competition for me will be Emirates based EtiSalat, which has access to some deep pockets, as it is effectively owned by the Al-Makthoum family, EtiSalat has already managed to acquire a license in Iran & has been expanding into Africa for some time. If STC is to compete, I think they will have to look at raising more than $10B & the S&P / Moodys ratings will surely come into play to that effect. Whatever the outcome at a business level, I can only conclude that this is good for the Middle Eastern region, freeing up access & allowing mass communication on a greater scale.

UPDATE (05/01/09) : Saudi Telecom eyes government stake in Batelco

Saudi Telecom Co (STC) is eyeing the Bahraini government”s 36.7 percent stake in Bahrain Telecommunications Co (Batelco), a Kuwaiti newspaper said on Sunday. Local newspapers said in an unsourced report that the Saudi firm had submitted a request to Bahrain”s biggest telecoms operator to buy the stake.An STC spokesman could not be reached for comment while a Batelco spokeswoman declined to comment on the report because it related to shareholder issues.
Mumtlakat Holding Co, the investment arm of the Bahraini government, holds a 36.7ـpercent stake in Batelco, according to its website. Mumtalakat”s spokesman Adel AlـAnsari could not immediately comment on the newspaper report.
Batelco is a shareholder in Etihad Atheeb Telecommunications Co, one of three firms licensed to operate new fixedـline networks which would end STC”s monopoly status in this segment.

UPDATE 2 : (29/01/09)  : From Mobile News on WordPress : STC Bags 3rd Mobile Licence in Bahrain

The Telecommunications Regulatory Authority (TRA) today announced that Saudi Telecommunications Company (STC) is the successful bidder for the third mobile Licence in Bahrain with a bid of Bahraini Dinars eighty six million six hundred eighty seven thousands (BD 86,687,000.000)