When Gulf telecommunications giant Etisalat replaced its veteran chairman last week, he became the latest casualty of a multi-billion dollar foreign expansion which has failed to translate into profits and may prompt the firm to sell overseas assets to offset a decline in income.
Such a retreat would have been unthinkable just a few years ago when Etisalat, the UAE's largest listed company, conceived its publicly stated ambition to become one of the world's top 10 telecommunications firms.
But Mohammad Omran's exit suggests strategy changes may be on the cards. It also serves as a warning to cash-rich Gulf companies which could be tempted to snap up overseas assets as the global financial crisis makes them cheaper: Etisalat found buying assets easier than making them profitable.
Omran, a chief architect of state-controlled Etisalat's foreign splurge, was removed through a decree by UAE President Sheikh Khalifa bin Zayed al-Nahyan. His replacement is another local citizen, Eissa al-Suwaidi, who is also chairman of Abu Dhabi Commercial Bank and a director at other government-controlled institutions.
Suwaidi will have some stark statistics to consider. The Gulf's second biggest telecommunications firm, behind Saudi Telecom, spent about US$12.6bn between 2004 and 2009 buying companies, licenses and other investments, according to a Reuters analysis of Etisalat's public statements.
Analysts say it overpaid in several instances. In Pakistan, it stumped up nearly double the nearest bid to buy into Pakistan Telecommunication Co, but its stake is now worth less than 10 percent what it paid, according to stock market prices.
The spending spree expanded its customer base to 167m across 17 countries in Asia, Africa and the Middle East. But Etisalat's profits have fallen 34 percent since their peak in 2009 and are now at roughly the same level as in 2006, when its foreign plans were in their infancy.
The slump has reduced the royalty or tax which Etisalat, 60-percent owned by the government, pays to state coffers. Its shares have dropped 45 percent from a 2008 high, making it worth about US$19.8bn, according to Reuters data.
"It's very difficult to be successful across all 17 markets and the costs are punitive," said a regional telecommunications analyst who declined to be identified because he was not authorized to speak publicly on the issue.
"Etisalat should focus on and consolidate its operations in five to six key markets, and cut any possible losses in the other 10 to 12 countries."
There are signs that the consolidation may have begun. Etisalat has put its stake in Indonesia's third biggest phone company PT XL Axiata on the auction block in a sale that could raise up to $700 million - though its decision appears mainly due to differences of opinion with its Asian partner.
A sale would mark Etisalat's second exit from Asia after it shut down its Indian joint venture earlier this year. Etisalat took an US$827m writedown and sued its partners for alleged fraud after the affiliate became one of several operators to lose its license because of a corruption probe.
In a rare public statement in May, group chief executive Ahmad Julfar said the firm could sell assets.
"Our strategy is to focus on the portfolio we have," Julfar told a Dubai conference. "Within this portfolio we have a few markets which we are revisiting - should we stay in this market? Should we consolidate? Or should we divest?"
He declined to say which units might be targeted.
A less-is-more philosophy would free up management time for Etisalat to refocus on its home market, where the loss of its monopoly in 2007 was one impetus for its overseas ambitions.
The UAE still provides the lion's share of income, accounting for 74 percent of revenue in 2011 and more than 90 percent of net profits, despite being home to just 6 percent of the company's subscribers.
Etisalat's domestic revenue is in decline, largely due to increased use of cheap or free Internet-based phone services among the UAE's mainly expatriate population, which has hurt the company's high-margin international calls business.
More attention to this market might help Etisalat fight back against smaller domestic rival du, which has built up a 47 percent share of mobile subscribers in five years.
Analysts say one problem for Etisalat's foreign investment program is that its assets only have affiliate status in the most attractive markets such as Saudi Arabia, while its full subsidiaries are mainly in low-population, low-income markets in Asia and Africa.
"In the long term, it's difficult for four to five mobile operators to all be successful in the same market," said Matthew Reed, a senior analyst at Informa Telecoms and Media. "You don't end up with five players with roughly equal market shares, and so the smaller players either consolidate or become also-rans."
Selling out of Pakistan, Afghanistan and Sudan - all mired in political strife and difficult, high-cost environments - as well as Tanzania, Sri Lanka and West African unit Atlantique Telecom, could allow Etisalat to reinvest any sale gains in its more promising operations.
Such a move would leave Etisalat with the UAE, Saudi Arabia, Egypt and Nigeria, all wealthy or high-growth, populous markets. Meanwhile, reducing the company's footprint would have little impact on operating revenue.
"Last year, Deutsche Bank had a mandate from Etisalat to help them review alternatives for the African business and potentially help a full sale," said a banking source, adding that talks with at least one potential buyer had apparently foundered. The banker declined to be identified since the talks were not made public; comment was not available from Etisalat, while a spokesman for Deutsche in Dubai declined to comment.
Ironically, some potential buyers for Etisalat's assets may be European companies which until recently looked to have weaker growth prospects than the UAE firm. France's Vivendi has previously shown interest in buying into Africa; it was in talks with Kuwait's Zain in 2009 for its African business, before Zain sold the assets to Bharti Airtel for US$9bn in 2010.
Other potential suitors for some of Etisalat's assets include France Telecom, which has been seeking to grow in Africa and also owns stakes in operators in Jordan and Iraq.
With a reshuffled management - it has named a new chief executive as well as heads of finance, marketing and strategy within the last 16 months - and a newly appointed board, Etisalat may not undertake a major sale process for a few months yet.
But tackling problems at its international business may become urgent.
"With increasing competition in the local market, they cannot afford to sit back on their international operations and see them depreciate in value further," said the banking source.