Financial Analysis of Emirates Telecommunication Group Company Report

This report provides a comprehensive financial analysis of the Emirates Telecommunication Group Company (Etisalat), a leading telecommunications service provider in the UAE. The report begins with a company profile, detailing its establishment, ownership structure, and market position. It then delves into Etisalat's financial performance, analyzing key metrics such as total assets, sales, and employee numbers. The analysis further includes a calculation and interpretation of crucial financial ratios, including dividend yield, price-earnings ratio, and earnings per share, for the years 2016 and 2017. Based on these ratios, the report offers opinions and recommendations regarding the company's future performance and provides investment advice, concluding that short-term stock purchases might not yield desired returns due to a decline in dividend yield and an uncertain profit outlook. The report is supported by relevant references.

Running head: INTRODUCTION TO FINANCE
Name of the Student:
Company analysed: Emirates Telecommunication Group Company
Brief summary of the report:
The current report intends to assess the business operations and background of
Emirates Telecommunication Group Company, in which details have been provided
regarding its size, competitors and different financial ratios. The second segment of the report
would lay stress on estimating the future performance of the organisation, profitability and
recommendation to the investor regarding purchasing or selling its stocks.

1INTRODUCTION TO FINANCE
Table of Contents
A. Company profile:...................................................................................................................2
Question 1:.............................................................................................................................2
Question 2:.............................................................................................................................2
Question 3:.............................................................................................................................2
Question 4:.............................................................................................................................2
Question 5:.............................................................................................................................2
Question 6:.............................................................................................................................2
Question 7:.............................................................................................................................2
Question 8:.............................................................................................................................3
Question 9:.............................................................................................................................3
B. Opinions and recommendations:...........................................................................................3
Question 1:.............................................................................................................................3
Question 2:.............................................................................................................................4
Question 3:.............................................................................................................................4
References:.................................................................................................................................5

2INTRODUCTION TO FINANCE
A. Company profile:
Question 1:
The company selected for this assignment is Emirates Telecommunication Group
Company PJSC, which is the leading telecommunication service provider in the province of
UAE. The organisation is headquartered in Abu Dhabi, UAE (Etisalat.com, 2018).
Question 2:
At present, there are two Chief Executive Officers (CEO) of Emirates
Telecommunication Group Company. Eng. Saleh Al Abdooli and Hatim Dowidar are the
CEOs of the organisation and they are associated with the group since 1992 and 2016
respectively.
Question 3:
Emirates Telecommunication Group Company was established in 1976 in the form of
joint stock firm between International Aeradio Limited, a British firm and local partners.
However, in 1983, there was a change in the ownership structure, since the UAE government
held 60% share in the organisation and the remaining 40% was traded publicly.
Question 4:
The organisation is trading in Abu Dhabi Stock Exchange (ADX). In ADX, it is
trading under the ticker symbol of Etisalat, while the ticker symbol in Bloomberg is Etisalat:
UH and in Reuters, it is trading under the ticker symbol of ETEL.AD.
Question 5:
Etisalat is a telecommunications service provider functioning in 19 nations in the
Middle East, Asia and Africa. It is offering fixed-line voice, mobile and data services to
entities, individuals and global telecommunications firms, ISPs, mobile operators and content
providers. It is considered as the significant hub for internet in the Middle East in relation to
voice, broadcast, corporate and roaming data services having considerable regional and
global networks. Moreover, the organisation provides various hi-tech complimentary services
to the telecommunications sector like technical and managerial training, payment solutions,
SIM card manufacturing, peering, clearing house services, data and voice transit along with
land cable and submarine services.
Question 6:
The size of Etilsalat could be identified in terms of its total assets, total sales and total
number of employees.
Particulars 2016 2017
Total assets AED122,520,663,000 AED128,284,105,000
Total sales AED52,360,037,000 AED51,666,431,000
Total number of employees 38.905 39,508
Question 7:
The UAE telecommunications sector is duopoly market, in which two service
providers are present. One of them is Etisalat and its biggest competitor in the market is
Emirates Integrated Telecommunications Company (Du) providing similar kind of services
like Etisalat.

3INTRODUCTION TO FINANCE
Question 8:
Particulars Details 2016 2017
Net income A
8,42,11,85,00
0
8,44,44,37,00
0
Weighted average shares
outstanding B
8,69,67,54,00
0
8,69,67,54,00
0
Market price per share C
0.2
8
0.1
5
Annual dividend per share D
0.8
0 1
Earnings per share E=A/B
0.9
7
0.9
7
Price/Earnings ratio C/E
0.2
9
0.1
5
Dividend yield ratio C/D 35.36% 18.50%
Question 9:
Dec 28, 2017 Aug 13, 2017Mar 28, 2017Nov 17, 2016 Jun 22, 2016 Feb 14, 2016
0
500
1000
1500
2000
2500
3000
3500
4000
4500
5000
ADX Historical prices and Etisalat Historical
Prices
ADX stock price
Etisalat stock price
B. Opinions and recommendations:
Question 1:
In order to predict about the performance of Etisalat in the telecommunications
industry of UAE, the two ratios from the above section are taken into consideration and they
include dividend yield and price/earnings ratio. In the words of Barr (2018), dividend yield is
a financial ratio, which gauges the cash dividend amounts distributed to the common
shareholders of an organisation in relation to the market price per share. The investors often
prefer higher ratio, since it implies better returns on their stock investments. In case of
Etisalat, the dividend yield has fallen significantly from 35.36% in 2016 to 18.50% in 2017
and this signifies that the shareholders have received lower returns (Etisalat.com, 2018).
As remarked by Finkler et al., (2016), price earnings ratio signifies the future prospect
of the organisations in the market. A higher ratio is always favourable, since it denotes that
the future growth of the organisation is stable in the market. In this case, the ratio has

4INTRODUCTION TO FINANCE
declined in 2017 and it is below 1, which signifies that the company might face difficulties in
ensuring its future growth in the long-run.
Question 2:
Earnings per share could be considered for estimating the future profitability of
Etisalat in the UAE telecommunications sector. This ratio gauges the profitability of an
organisation by considering its net income and outstanding shares (Titman, Keown & Martin,
2017). In case of Etisalat, the earnings per share of the organisation have remained identical
at 0.97 in both 2016 and 2017. Hence, the future profitability of the organisation is expected
to remain stable, as there might not be significant rise or decline in the same.
Question 3:
Based on the above evaluation, it is recommended to the investors to abstain from
purchasing stocks of Etisalat in the short-term. This is because such purchase might not fetch
the desired returns for them due to fall in dividend yield (Zietlow et al., 2018). Moreover, the
increase in profit level is not ensured as well. Thus, it could be inferred that buying the stock
of Etisalat would result in loss for the investors.

5INTRODUCTION TO FINANCE
References:
Barr, M.J., 2018. Budgets and financial management in higher education. John Wiley &
Sons.
Etisalat.com. (2018). Retrieved from http://www.etisalat.com/en/index.jsp
Etisalat.com. (2018). Retrieved from http://www.etisalat.com/en/ir/annualreports/annual-
reports.jsp
Finkler, S.A., Smith, D.L., Calabrese, T.D. & Purtell, R.M. (2016). Financial management
for public, health, and not-for-profit organizations. CQ Press.
Titman, S., Keown, A. J., & Martin, J. D. (2017). Financial management: Principles and
applications. Pearson.
Zietlow, J., Hankin, J.A., Seidner, A. and O'Brien, T., 2018. Financial management for
nonprofit organizations: Policies and practices. John Wiley & Sons.