Telecoms

Abu Dhabi’s Mubadala considers selling stake in du

March 20, 2025, 5:16 PM

Du’s shares are up 8.3% this year, outperforming Dubai’s index, which is down 0.6%

Mubadala owns 10% of du
Potential to list on MSCI
14.8 price-to-earnings ratio

Abu Dhabi sovereign fund Mubadala may sell its stake in du, the UAE’s second-largest telecom operator by subscribers, which if added to the free float would boost the stock’s chances of being included in emerging market indexes.

Admittance to the MSCI and FTSE emerging market benchmarks means that exchange-traded funds which track these measures must buy that company’s stock, which typically boosts its share price.

Du, whose free float is 20 percent, has not been included in these indexes. Mubadala owns 10 percent of du through a subsidiary and has hired several banks to advise on selling this stake, Bloomberg reported, citing unidentified sources.

“One of the overhangs for du is (its) limited float and liquidity,” Bahrain investment bank Sico wrote in a note.

“Depending on the size of the offering and assuming this is sold in the secondary market to the public, the increase in float should be positive for du’s valuation. Higher float could also be a trigger for international indices inclusion.”

The UAE has a 1.3 percent weighting on the MSCI emerging index, which includes several of the country’s top listed companies including Emaar Properties, First Abu Dhabi Bank and Adnoc Drilling Co.

This could be an optimal moment for Mubadala to sell: Du’s shares are up 8.3 percent this year, outperforming Dubai’s index, which is down 0.6 percent over the same period.

The telecom operator’s stock hit an all-time high in mid-February but has since retreated slightly.

Du’s stock price gives it a trailing price-to-earnings ratio of 14.8 and a dividend yield of 6.7 percent.

Its current market capitalisation is AED36.8 billion ($10 billion), which values Mubadala’s stake at $1 billion.

The company, whose official name is Emirates Integrated Telecommunications Co, launched services in February 2007, ending the UAE monopoly of Emirates Telecommunications Group Co (E&, formerly known as Etisalat).

Both operators are ultimately owned by the government, with competition between the duo benign. The two companies are an important source of federal revenue through the taxes and the dividends they pay.

Aside from Mubadala, Emirates Investment Authority – a UAE federal government fund – holds just over half of du and another government-run company Emirates Communications and Technologies Co has a 19.7 percent stake.

Unlike Etisalat which has a footprint across several continents, du provides mobile services only in the UAE. This narrow focus on the wealthy growing domestic market has benefitted shareholders.

Du made a net profit of AED2.5 billion ($0.7 billion) in 2024, up 49 percent year on year due to favourable tax changes. Its annual revenue rose 7 percent to AED14.6 billion in 2024, according to its financial statements.

The company forecasts its revenue will expand 5-7 percent in 2025.