Etisalat bought 13.29% stake in XL Axiata for US$440m in 2007
UAE telecom operator Etisalat plans to sell its entire 13.29 percent stake in Indonesia's number three phone firm PT XL Axiata, to raise between US$600 to US$700 million this year, sources said on Tuesday.
Etisalat has been considering the sale for months after failing to expand its partnership with XL Axiata's major shareholder, Malaysia's Axiata Group, three sources with direct knowledge of the matter said.
"Etisalat thinks it hasn't been treated well in this deal... the reality is that the relationship soured a bit with the new management of Axiata," said one of the sources, who declined to be identified because of the sensitivity of the matter. "They have never been able to find a way to work together in four years."
Etisalat and XL Axiata declined to comment.
Etisalat bought its XL Axiata stake in 2007 for US$440m as part of a strategy to expand in east Asia.
If the sale goes ahead, it would be the second time for the Middle Eastern firm to exit from an Asian country this year after it decided in February to shut down its joint venture in India, where it has alleged fraud against its partners.
Indonesia, Southeast Asia's largest economy, has drawn strong foreign investment in recent years and was recently lifted to a sovereign investment grade status, though its markets have sagged in recent weeks and analysts say the case for piling in more money has weakened.
Analysts said a maturing telecoms market in Indonesia could also be a factor in the planned stake sale.
"The telecom industry overall is not attractive anymore... Etisalat might think it's a good time to cash out," said Teddy Dwitama, a market analyst at Jakarta-based brokerage OSK Nusadana.
"XL's profit might have soared significantly in 2008 to 2010, but we expect slower growth in 2012 due to stiff competition."
Etisalat has hired JPMorgan and Morgan Stanley to handle the sale, which may launch via an equity placement, the sources said.
JPMorgan and Morgan Stanley declined to comment. XL Axiata, which has a market capitalisation of
US$4.3bn, is itself currently in the process of selling 7,000 telecom towers for US$1.4bn this year, and has hired Goldman Sachs to handle this sale.