UAE’s du could be next company to increase foreign ownership limit

UAE telco du could be the next company to increase its foreign ownership limit in the Middle East and North Africa, according to investment bank Arqaam Capital.

The bank said on Sunday that an expected increase in the liquidity of du shares as a result of lifting foreign ownership restrictions would be enough to qualify it for the MSCI Emerging Markets Index after a year.

In September 2015, du rival Etisalat opened up to 20 per cent of its shares to foreign investors.

“We would expect du’s MSCI inclusion to come no sooner than a year after the foreign ownership limit change due to its relatively lower liquidity as we estimate its annualised traded value ratio in 2015 to have been only about 9 per cent, below the required 15 per cent,” said Arqaam Capital head of technology, media and telecoms research Tibor Bokor.

Arqaam said du may even increase its foreign ownership limit further once it has qualified for MSCI inclusion, which requires an AVTR of more than 15 per cent.

To qualify du’s liquidity would need to increase by 67 percent to an average daily trading volume of about $1m compared to $0.6m today, Arqaam said. The telco’s ADTV could increase to more than $2-3m a day based on the liquidity of similar sized stocks, according to the bank.

Du chief executive Osman Sultan told UAE daily Gulf News that any decision to lift the company’s foreign ownership restrictions would be made by its board.

He said no such decision had been made but the company remained open to it.