Etisalat has committed to making one of the UAE's largest ever investments into Iran.
Etisalat has committed to making one of the UAE's largest ever investments into Iran.

Etisalat's Iran bid trumps competitors



Etisalat is set to make one of the UAE's largest investments in Iran, confirming that it is the highest bidder for the country's third mobile licence. Reports in the Iranian media say a consortium led by Etisalat in partnership with an Iranian government-controlled partner has won the tender, with a formal government announcement due next month. The company yesterday confirmed that the government had ranked its bid "first among others in terms of financial offer". Kamal Mohamedpour, Iran's deputy minister for information and communication technology, was quoted in the Iranian press yesterday as saying no official decision had been made, and that the tender committee would present its report to the ministry later this week. He warned that reports published prior to an official announcement should not be relied on. Officials at Etisalat declined to comment on the process, but a disclosure to the Abu Dhabi Securities Exchange confirmed the company was the highest bidder. It has been in discussions with the Iranian government since earlier this year regarding entering the country, where less than 60 per cent of its 73 million people own a mobile phone. The new network will mean Etisalat has a presence to the four largest economies in the Middle East: Saudi Arabia, Iran, the UAE and Egypt. Previous statements by Iranian officials have suggested the licence would be valued in the range of US$300 million (Dh1.1 billion) to $800m, although current market conditions are likely to have pushed the price to the low end of the scale. The licence will include exclusive rights to use the new high-speed 3G standard; it is likely that Etisalat will invest at least $1bn in rolling out a national network. A number of deals in recent years have underscored the opportunities - and risks - for UAE companies in Iran. An aviation agreement signed between the two countries earlier in the month means local carriers will make hundreds of new flights each week to major Iranian cities. By 2012, Etihad - which flies three times a week to the Iranian capital - will operate 43 weekly flights to six major cities. Crescent Petroleum, based in Sharjah, invested an estimated $1bn building a pipeline connectBut the facility sits unused as the Iranian government attempts to agree on a higher price for the gas, which has increased in value substantially since the contracts were negotiated in 2005. The close ties between the two countries mean that the UAE is already Iran's largest trading ­partner. At least 300,000 Iranians live and work in the UAE, with billions of dollars worth of Iranian assets and thousands of Iranian-run businesses based here. The Iranian mobile market is split between the state-owned Telecommunications Company of Iran and Irancell, 49 per cent owned by the South African regional operator MTN. MTN is present in a number of high-growth emerging markets, including Nigeria and Sudan. But more than a quarter of its new customers in the past year have been in Iran, where its subscriber base has more than doubled to 13.1 million. While not as lucrative as Etisalat's home base in the UAE, the Iranian mobile market is relatively high-spending, with MTN reporting a monthly average revenue per user of $9, double that of other emerging economies such as India and Nigeria, where Etisalat is also expanding. The company has at least $3bn in cash to invest in international expansion and is looking to take advantage of the financial crisis by acquiring undervalued assets. Like other state-owned operators in the GCC, the company is keen to tap high-growth emerging economies as domestic markets mature and become increasingly competitive. In the past 12 months it has launched a new network in Nigeria and acquired a stake in one of Indonesia's largest operators. It also acquired a minority stake in Swan Telecom, one of India's newly licensed national networks. An agreement to acquire the Iraqi operator Korek, based in the country's Kurdish region, is expected in the coming months. tgara@thenational.ae

Ways to control drones

Countries have been coming up with ways to restrict and monitor the use of non-commercial drones to keep them from trespassing on controlled areas such as airports.

"Drones vary in size and some can be as big as a small city car - so imagine the impact of one hitting an airplane. It's a huge risk, especially when commercial airliners are not designed to make or take sudden evasive manoeuvres like drones can" says Saj Ahmed, chief analyst at London-based StrategicAero Research.

New measures have now been taken to monitor drone activity, Geo-fencing technology is one.

It's a method designed to prevent drones from drifting into banned areas. The technology uses GPS location signals to stop its machines flying close to airports and other restricted zones.

The European commission has recently announced a blueprint to make drone use in low-level airspace safe, secure and environmentally friendly. This process is called “U-Space” – it covers altitudes of up to 150 metres. It is also noteworthy that that UK Civil Aviation Authority recommends drones to be flown at no higher than 400ft. “U-Space” technology will be governed by a system similar to air traffic control management, which will be automated using tools like geo-fencing.

The UAE has drawn serious measures to ensure users register their devices under strict new laws. Authorities have urged that users must obtain approval in advance before flying the drones, non registered drone use in Dubai will result in a fine of up to twenty thousand dirhams under a new resolution approved by Sheikh Hamdan bin Mohammed, Crown Prince of Dubai.

Mr Ahmad suggest that "Hefty fines running into hundreds of thousands of dollars need to compensate for the cost of airport disruption and flight diversions to lengthy jail spells, confiscation of travel rights and use of drones for a lengthy period" must be enforced in order to reduce airport intrusion.

Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.

Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.

Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.

Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.

“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.

Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.

From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.

Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.

BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.

Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.

Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.

“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.

Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.

“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.

“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”

The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”