Will company go ahead with 5 pc buyback as announced?
A close look at etisalat’s balance sheet shows that while the company has a total borrowings of AED24.828 billion as of June 30, 2020, AED12.080 billion will come up for repayment within 12 months whereas, the remaining AED12.748 billion will have time beyond 12 months to settle the loans, as per the company financials.
More importantly, if the company opts to exercise the five per cent share buyback programme as announced earlier, the company needs to cough up more than AED7 billion to meet the expense as the exercise will entail buyback of up to 435 million shares from its shareholders.
The company’s share closed at AED16.60 Tuesday on Abu Dhabi Stock Market where it is listed. There are views expressed by experts that many would not opt to exercise the buyback as the company’s decent dividend history ensures a yield of close to 5 per cent at the current price.
Having said that, businessbenchmark.news is not in the know as to whether the company is going ahead with the buyback plan as announced earlier. A query to this end sent to the company is yet to elicit any response.
Though the buyback plan was mooted more than two years ago, the company got its regulatory approval in October 2019. Significantly, to the available information on the regulatory aspect of this process, buyback needs to be completed within one year of the regulatory approval from Securities and Commodities Authority (SCA) – which was received by the company close to a year ago, in October 2019.
In June 2018, international ratings agency, S&P Global also had said that “The UAE’s largest telecom operator etisalat’s $2 billion (Dh7.34 billion) share buyback will take place over the next two years.”
Though the telecom major sits on a cash and balances of AED24.4 billion as of June 30, 2020, the company carries a net debt position of AED400 million unlike six months ago towards December end, 2019, when the company had cash and balances to the tune of AED29.657 billion and total debt at AED23.889 billion leaving a net cash position of AED5.678 billion.
While the consolidated debt of the Group as of June 30, 2020 stood at AED24.8 billion, the major contributors to this are etisalat (UAE) at AED14.8 billion, Maroc Telecom Group at AED7.3 billion and etisalat Misr at AED1.3 billion. As usual, all markets have reported profits for etisalat except Pakistan.
Pakistan operations report loss before tax
In Pakistan, subscriber base decreased to 24.8 million representing a 2 per cent drop year over year and 5 per cent quarter over quarter. This decrease is attributed to lower subscriber acquisition during the lockdown.
The Pakistan revenue growth was impacted also by the unfavourable exchange rate movement in Pakistan rupee. The revenue for the second quarter was AED700 million representing a year on year decrease of 15 per cent and a drop of 6 per cent quarter over quarter.
The Pakistan operations closed the 6-month period ending June 30, 2020 with a loss before tax of AED37.53 million against a profit of AED51.39 million for the same period last year.
UAE capital expenditure
In the UAE, capital expenditure in the Q2 was focused on ensuring network quality given the surge in data traffic as a result of the lockdown and enhancing of network capacity and speed. Capital expenditure during the quarter amounted to AED900 million a 36 per cent increase in comparison with the same period last year