IHS Global Insight Perspective | |
Significance | The deal is part of France Telecom’s latest strategy to invest in emerging markets. |
Implications | France Telecom has done well to buy the stake, as there was competition from other strong regional players such as Etisalat and Orascom. |
Outlook | The Moroccan market is in a strong position for future growth. However, Medi Telecom (MediTel) faces strong competition from Wana, which is partly backed by the Middle East’s largest operator Zain. |
France Telecom has announced that it has agreed to buy a 40% stake in Morocco’s second operator, MediTel, for 640 million euro (US$836 million), the Wall Street Journal reports.
The company has also stated that it will increase its MediTel stake to 45% in 2011 and 49% in 2015, adding that it will consolidate the stake in its accounts as of fiscal 2015.
Stephane Richard, France Telecom’s chief executive, commented on the deal: "The acquisition of this stake in Medi Telecom is the first concrete step in our new policy of expansion outside Europe, and contributes to our stated aim of doubling our revenue in Africa and the Middle East over the next five years."
MediTel's operational and financial performance has been solid in recent announcements, owing to an increase in its customer base of 15% at the end of the first half of 2010. It reported earnings before interest, tax, depreciation and amortisation (EBITDA) of 1.014 billion Moroccan dirhams (US$105 million), up 7.3% year-on-year (y/y), and revenues of 2.72 billion dirhams, up 12% y/y.
In September 2009, Portugal Telecom and Telefónica sold their 32.2% stake in MediTel for US$574 million to a group of private investment companies, including RMA Watanya (a Moroccan insurance company), FinanceCom (a privately owned group), and government financing arm Fipar Holding (see Morocco: 4 September 2009: Telefónica and Portugal Telecom Sell Stakes to Group of Private Moroccan Companies).
Outlook and Implications
- France Telecom’s Strategy: Richard is focused on a new strategy that focuses on asset swaps, partnerships and licence purchases, as it seeks to generate approximately 2.0 billion euro in revenue from the emerging markets of Africa and the Middle East. Richard has also indicated that the operator is targeting revenue generation of 1 billion euro from organic growth.
One of the operator’s key long-term goals is to double its revenue from emerging markets over the next five years, with the Middle East and North Africa (MENA) region a key part of its strategy. France Telecom has increased investment in Africa through submarine cable investment and recent mobile-licence acquisitions in Guinea, Guinea-Bissau, Niger, Tunisia, and the Central African Republic (CAR). It has also expressed interest in entering the burgeoning Iraqi market.
- Moroccan Mobile Market: MediTel has been performing well in the Moroccan mobile market. The operator has also launched 3G services, enabling it to compete on a similar level to that of its competitors Maroc Telecom and Wana (in which Zain has a 31% stake). Maroc Telecom has a market share of approximately 53%, with MediTel on 40% and Wana accounting for the remainder.
The Moroccan mobile market is in a strong position for growth, with penetration was 79% at the end of 2009. France Telecom will also benefit from the high number of French nationals living in Morocco, and from the number of mobile users travelling for business and pleasure between the two nations.