Alarm bells at Etisalat

Fitch Ratings said that organic growth for Etisalat's international operations is likely to be offset by declines seen in the domestic market. While affirming the UAE telco's long-term foreign currency issuer default rating at 'A+' with a stable outlook, Fitch said the major concern facing the company was "increasing competition in the UAE market". The IDR reflects Fitch's assessment of the sovereign's creditworthiness, given Etisalat's strong operational and strategic ties with the UAE. The major concern remains increasing competition in the UAE market, which will result in lower ARPUs and substantial capex requirements of the international businesses. Etisalat has invested heavily in modernization and development of infrastructure in the UAE and the fiber optic network since 2009. According to natural anticipation, this would result in lower average revenue per user while it also voiced concerns about substantial capex requirements of the international businesses. "Fitch does not expect the entry of a third mobile operator into the UAE market, but notes that falling ARPU mainly on the fixed-line and prepaid segment and operating margins in the local market - due to competition from du will also affect the group's operating margin," the agency added.