Etisalat Plans to Sell All Its Shares in XL Axiata?

We learned that UAE telecom company Etisalat plans to sell its entire shares in XL Axiata (EXCL). According to Reuters, Etisalat which has 13.29% ownership in XL will sell its share this year to gain $600 - $700 million.

Its incompatibility with Axiata Group as the majority share holder seems to have led to this decision to sell. If this is true, then this will be the second time Etisalat will have done the same in Asian after selling all of its share in a joint venture in India.

According to an anonymous source, Etisalat was not treated properly by the new management of Axiata Group, based in Malaysia. Over the last few years, it seems that they haven't found a way to cooperate amicably. Etisalat bought the shares in 2007 which was worth $440 million. This means that within five years of investment in XL, Etisalat would reap about 40-60% profit.

I quite agree with the analysis in Reuters that the Indonesian market has been increasingly saturated while its growth decreases with the increasing amount of mobile phone penetration into the country. It is predicted that in 2012, the growth of telecommunication industry in Indonesia is not going to reach double digits (below 10%). This may be one of the contributing factors for Etisalat to get out of the Indonesian market and invest in another country.

It is stated that Etisalat has appointed JP Morgan and Morgan Stanley to handle the sale, even though the two banks are still refusing to comment. XL Axiata itself currently has a market capitalization of $4.3 billion and recorded net profit of Rp 2.8 trillion. In 2012, XL will focus on the addition of data services subscribers that have indeed been increasing in recent years.