Gulf telecom companies are expanding into European markets through mergers and acquisitions, according to a report released recently by S&P Global Ratings.
Interestingly, they undertake this to diversify their revenue streams and lower the risks associated with the volatility of the emerging markets in which they operate.
Gulf Telecom Market Dynamics
According to the S&P Global Ratings report, Gulf telecom companies are experiencing a slow increase in local market revenues due to market saturation, where the percentage of people using mobile phones has surpassed 100%. This has led them to look for new opportunities in European markets with stable growth and low risks.
The international rating agency added that even while it anticipates the European telecom market’s growth to decelerate to 2% on average, the reduction in capital expenditure needed in these areas may help Gulf operators’ cash flows.
The agency ascribed this trend by Gulf companies to another factor: their desire to lower the risks associated with the emerging markets in which they do business. By expanding their operations in Europe, Gulf companies could protect their portfolios from currency fluctuations in other markets, including those in Egypt, Pakistan, and the majority of sub-Saharan Africa.
The Emirati (e&) acquired a majority stake in PPF Telecom Group, which owns assets in Bulgaria, Hungary, Serbia, and Slovakia, for 50% plus one, totalling 2.36 billion euros. This was the most notable of several significant deals that have been carried out in Europe in recent months, all of which were spearheaded by Gulf companies.
The Spanish government granted the Saudi Telecom Company (STC) permission to increase its ownership in the Spanish “Telefónica” Group from 4.9% to 9.97% in Saudi Arabia. Additionally, STC received the authority to designate a member of the board of directors.
The Emirati corporation signed a contract to purchase 100% of Telenor Pakistan for AED 1.4 billion, subject to regulatory clearances, and raised its ownership position in the British Vodafone Group to 15%, making it the company’s largest shareholder.
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Increasing its Visibility on The Global Stage
STC and Ooredoo have announced plans to invest $1 billion each in data centres over three years, indicating a shift in their focus from international growth to enhancing cloud computing and artificial intelligence capabilities.
Last December, the Saudi market also saw a strategic move when STC sold the Saudi Public Investment Fund its 51 per cent stake in its tower company, “TAWAL.” The fund’s goal was to transfer this stake, along with its stake in “Golden Lattes Investment,” to a new organisation to consolidate the Kingdom’s telecom tower infrastructure under a single organisation that oversees 30,000 towers across five countries.
While maintaining a primary focus on local markets to generate profits, S&P thinks these expansions will help solidify the standing of Gulf telecom businesses globally.
The research predicts that Gulf telecom companies will continue to grow in Europe due to their strong financial liquidity and well-defined development plans, but also highlights the strict regulatory oversight of these investments.
To guarantee the independence of its operations and safeguard national interests, for instance, the Spanish government placed restrictions on STC’s participation in Telefonica.
Since Gulf enterprises continue to rely on local and regional markets as their main sources of cash flows, the analysis revealed that these investments had no discernible impact on their credit ratings. However, starting in 2025, significant acquisitions like the one for PPF Telecom (e&) may result in a 15%–20% increase in sales and earnings.
The study found that the credit ratings of targeted companies have not improved due to a lack of operational management and financial guarantees from Gulf businesses. However, the European company’s credit rating was higher from (BB+) to (BBB-) after the purchase of (e&) PPF Telecom, the sole exception.
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