UAE’s Etisalat says no voting rights for foreign shareholders

Etisalat will not extend voting rights to foreign investors when the United Arab Emirates’ former telecom monopoly opens up its shares to non-UAE investors, it said on Wednesday.

Government-run Etisalat is worth nearly twice as much as the second biggest listed UAE company, but its publicly-traded shares can only be owned by UAE nationals and all institutions are excluded.

In June, Etisalat said it would loosen these rules to permit foreign and institutional investors to buy shares, and on Wednesday it provided further details after reforms were approved by the cabinet.

Non-UAE investors will be allowed to own up to 20 per cent of Etisalat’s shares, the company reiterated, but will not be granted voting rights, a statement to Abu Dhabi’s bourse said.

Given other attractions of the stock, that restriction should not deter foreign buyers, one analyst said.

“Even if they were allowed to vote the government owns a majority stake and so will be in charge,” said Shrouk Diab, an Assistant Vice President at NBK Capital in Dubai.

“Etisalat’s stable dividend policy is attractive to investors and the company is also a play on the UAE economy.”

Etisalat will likely be included in MSCI’s emerging market index after foreign share ownership is permitted, and its weighting on the MSCI will also probably be too big for funds tracking the index to ignore.

The firm has operations in 19 countries in the Middle East, Africa and Asia. The UAE accounted for 57 per cent of second-quarter revenue.

Three government-related funds own 80 percent of rival operator du’s shares. The remainder is held by individual investors and UAE-controlled institutions.

Consequently, Etisalat will be the sole means for non-UAE companies to get exposure to the UAE’s telecom sector.

The federal government, which owns 60 per cent of Etisalat through fund Emirates Investment Authority (EIA), will also be issued with a ‘special share’, the statement said.

This will grant it veto rights over key decisions, including changes to share capital, rights attached to shares, any merger approval and allowing the government’s stake to fall below 51 per cent.

Etisalat will also convert to a public joint stock company.

The company said it has one year from the amendment of the federal law to implement the agreed changes. Etisalat did not specify when the law was amended.