KT 3-4-2013_Layout 1 - Kuwait Times

BUSINESS
Ambani brothers bury hatchet with telecom deal
MUMBAI: India’s billionaire Ambani
brothers, who fought a very public feud
for spoils of their father’s business
empire, signed yesterday a $220-million
deal in the first tangible sign of a corporate
reconciliation. Reliance Jio
Infocomm, the telecom unit of Mukesh
Ambani-led Reliance Industries, signed
the agreement with Reliance
Communications, the flagship firm of
the Anil Ambani group, to share their
fibre-optic communications networks.
The long rumored pact is the “first in
an intended comprehensive framework
of business co-operation” between
Reliance Jio and RCom, to use each other’s
infrastructure across Indian cities,
the companies said.
This will provide “optimal utilization
of existing and future infrastructure of
both companies on a reciprocal basis”,
they added in separate but identical
statements.
There have been increasing signs of a
warming of ties between the brothers
since their fight for control of Reliance
erupted after their rags-to-riches father,
Dhirubhai, died in 2002 without leaving
a will.
“It is a positive sign that the brothers
are keen to work together,” said a fund
manager with a state-run brokerage
firm, who asked to remain unnamed.
The pair ended up splitting the Reliance
group left by their father that was India’s
most valuable listed company.
After a protracted court case that
saw their mother, Kokilaben, act as
peacemaker, the brothers agreed to
bury the hatchet and tear up a noncompetition
agreement that prevented
them from entering the same sectors.
In 2011, Mukesh and Anil came
together to dedicate a memorial to their
father, and their mother declared the
enmity over, telling reporters: “There is
love between the brothers.”
Tuesday’s agreement, while small in
value, was the first tangible evidence of
an end to the business rift between
Mukesh, India’s wealthiest man, and his
younger sibling Anil. News of the agree-
OMAHA: Matthew Miller of Omaha shops for a car in Omaha, Nebraska. March
turned out to be the best month for auto sales in at least six years in the US. — AP
US factory orders
up 3% in February
WASHINGTON: US factories rose sharply in
February from January on a surge in
demand for volatile aircraft. The gain offset
a drop in key orders that signal business
investment.
The Commerce Department said yesterday
that factory orders increased 3 percent
in February. That’s up 1 percent decline in
January and the biggest gain in five
months. The increase was due mostly to a
jump in orders for commercial aircraft.
Those orders rose 95.1 percent. Orders for
motor vehicles and parts also increased 1.4
percent. Orders for all durable goods,
which are products expected to last at least
three years, jumped 5.6 percent. Orders for
nondurable goods, such as processed food
and clothing, rose 0.8 percent.
Despite the gains, the report showed
that a key measure of business investment
plans fell. That could mean that some companies
were worried in February about
steep federal spending cuts that started on
March 1. Core capital goods, which include
machinery and equipment orders, fell 3.2
percent. Demand for construction machinery,
turbines and generators all fell sharply.
Orders for computers and electronic products
rose slightly.
Economists closely watch these orders
because they signal business investment
plans. Still, the decline followed a 6.7 percent
surge in January, the largest in nearly
three years. Analysts said that when aver-
aging the two months, business investment
orders showed a solid increase for the
January-March quarter. Many expect the
gains to resume this spring, helped by a
stronger job market that has kept consumers
spending. Consumers stepped up
spending in February after their income
jumped. The gain occurred even after
Social Security taxes increased in January,
reducing take-home pay for most
Americans.
Many economists raised their growth
forecasts after the report was released.
Some are predicting growth could increase
to around 3 percent in the January-March
quarter, up from 0.4 percent in the previous
three months. Other data show that some
companies may start to pull back because
of the government spending cuts. The
Institute for Supply Management reported
Monday that US manufacturing activity
expanded more slowly in March than
February, held back by weaker growth in
production and new orders.
But factories did hire at the fastest pace
in nine months, which was seen as an
encouraging sign ahead of Friday’s report
on employment in March. The economy
has added an average of 200,000 jobs a
month from November through February,
which helped lower the unemployment
rate in February to a four-year low of 7.7
percent. Economists predict a similar level
of hiring in March. — AP
Blue-chips help Dubai
halt slump; Oman up
MIDEAST STOCK MARKETS
DUBAI: Dubai’s index rebounded from a twomonth
low yesterday, although thin trading
left investors unsure whether these gains
marked the end of a recent downward trend.
Most Middle East markets edged higher in
lackluster trade. Dubai’s measure index
climbed 1 percent. About 79 million shares
traded, which was 58 percent higher than a
day earlier, but still less than half the 2013
average of 177 million shares. “The market was
very quiet so it’s very difficult to say this marks
a change in trend,” said Sebastien Henin, portfolio
manager at The National Investor. “Maybe
some investors think the market has fallen
enough.” The index has declined in four out of
six sessions, reducing year-to-date gains to
13.6 percent.
It is down 5.3 percent since Feb. 24’s 39month
peak and has broadly followed a similar
pattern to 2012 when an early-year surge gave
way to a sustained slump from early March.
But those bald numbers fail to show a crucial
difference this year compared to last, said
Henin. “Last year, it was speculative money
coming into small- and mid-cap stocks that
pushed the market higher, but this time it’s
only about three or four large stocks - the
quality names - that are responsible for most
of the rally,” said Henin. Therefore the market
can better hold onto its early-year gains as
these are backed up by company fundamentals,
with Emaar Properties, bank Emirates NBD
and telecom operator du the main drivers of
the rally. Emaar climbed 3 percent and
Emirates NBD added 1 percent, but du fell 0.4
percent. All are up more than 30 percent this
year.Oman’s index rose 0.7 percent to rebound
from a five-week low. It is down 2.7 percent
from March 26’s 22-month high.
The recent slump was due to investors
booking some early-year gains as well as many
stocks going ex-dividend, said Adel Nasr,
United Securities brokerage manager.
Investors used these cash dividends to buy
back stocks at lower prices, driving Tuesday’s
rebound. “It’s speculation on first-quarter
results,” said Nasr. “If earnings beat expectations
I would expect the market to rally to the
end of the year.” Many investors have targeted
the likes of OM Invest and Oman National
Investment Corp Holding (ONIC), because
these companies invest in Gulf equities and so
should benefit from a broadly positive regional
trend this year. OM Invest and ONIC climbed
5.5 and 3.1 percent respectively. Saudi Arabia’s
index rose for a sixth session in eight, but will
remain in a sideways range as investors are
unsure how best to profit from the country’s
growing economy, which is forecast to expand
4 percent in 2013. “Saudi has one of the best
stories from a macroeconomic perspective,
but taking a position on that is trickier
because the largest sector - petrochemicals - is
not really related to the domestic economy,”
said Henin. “People are hunting for domestic
plays.” That would normally make consumer
stocks a target, but these have already rallied,
said Henin.
Investors are also wary of banking stocks,
Saudi’s other heavyweight sector, due to worries
that provisions and tight net interest margins
will constrain profit growth.
Telecoms is attracting little interest - No.2
operator Mobily is near a six-year high and former
monopoly Saudi Telecom Co has been
making negative headlines after a second
chief executive quit in less than a year last
month and its fourth-quarter profit fell 79 percent.
Egypt’s main share index fell 0.4 percent,
its third straight decline, to slump to a 16week
low. “Bearish momentum is slowing
down,” wrote Pharos brokerage. — Reuters
This combo of file pictures shows chairman and managing director of Reliance
Industries Mukesh Ambani (left) and chairman of India’s Reliance Power Anil
Ambani. — AFP
ment heightened speculation among
analysts about further collaboration
between the brothers as well as about a
DUBAI: Pressure for Oman to keep increasing its
state spending every year is decreasing because
the country has finished building most of the
infrastructure it needs, finance minister Darwish
Al-Balushi said yesterday.
Speaking to reporters at a meeting of Arab
finance ministers and central bank governors in
Dubai, he said that in contrast to last year, Oman
did not expect this year to spend more than it
had originally budgeted. “As far as the budget is
concerned, we have in this year’s budget taken
all the anticipated expenditure to sustain the
expected growth. We do see any unexpected
expenditure to occur during the year,” he said.
Asked whether it was sustainable for Oman
to continue raising its spending over the medium
term, he replied: “Not necessarily. It depends
how oil prices will behave and also our level of
production.
“However, we think that most of our infrastructure
has been completed, therefore we do
not have pressure on increasing expenditure.”
Balushi also said his government did not now
plan to issue conventional bonds or sukuk this
year. Oman’s central bank chief Hamood
Sangour Al-Zadjali had said last month that the
government was likely to issue its first sukuk,
denominated in rials, towards the end of 2013 or
at the start of next year.
Meanwhile, Oman’s central bank has granted
Islamic banks a one-year relaxation of rules on
the amount of foreign assets which they can
hold, to give time for Islamic financial instruments
to be developed domestically.
Oman’s first full-fledged Islamic banks, Bank
Nizwa and Al Izz International Bank, were established
late last year and are now starting to operate
as the country introduces Islamic finance.
Under rules announced by the central bank in
December, the two banks can hold no more
than 40 percent of their net worth in the form of
foreign currency-denominated assets.
This threatens to hurt their profitability, how-
possible merger of the two Reliance
telecom companies. RCom’s shares leapt
as much as 17.2 percent to a high of
ever, because Oman has not yet developed a
market in sukuk (Islamic bonds) or other shariacompliant
instruments which the banks could
use to manage their liquidity.
Al-Zadjali said that for the first six months,
the limit would be raised to 75 percent, and it
would be 50 percent for the following six
months. Then the 40 percent limit would apply.
“After that they can have local sukuk and they
can be building local credits,” Zadjali said at a
meeting of Arab central bankers and finance
ministers in Dubai. “It’s a definite period, it’s one
year...until they set the client base.” Last year, the
two lenders raised a combined 100 million rials
($260 million) through their initial public offers
of shares, with Bank Nizwa having 150 million
WEDNESDAY, APRIL 3, 2013
66.9 rupees after the news before retracing
some of their gains to close up nearly
11 percent at 63.3 rupees. Mukesh
Ambani’s Reliance Jio is unlisted.
The deal will help Reliance Jio
Infocomm roll out its high-speed fourthgeneration
(4G) services. Mukesh
Ambani is planning to establish an ultrafast
4G telecommunications carrier later
in 2013. Analysts say sharing fibre-optic
networks and other infrastructure such
as telecom towers could prove mutually
beneficial by helping Mukesh reduce
costs at the same time as boosting the
fortunes of Anil’s debt-laden group.
RCom will have reciprocal access to
the optic fibre infrastructure which
Reliance Jio will build in the future, the
companies said.
“Both brothers have a presence in
telecom. Their working together makes
sense at a time when the cost of doing
business is high and the economic
environment is tough,” said Sonam
Udasi, head of research with IDBI
Capital. — AFP
Pressure on Oman to
raise spending eases
State completes infrastructure projects
DUBAI: DAMAC Properties, a privately-held
Dubai developer, is considering listing its shares
on the stock market and has approached banks
with proposals for advisory roles as it bets on a
recovery in the emirate’s real estate market.
The developer has submitted requests to a
handful of leading international banks, three
sources aware of the plan said, speaking on condition
of anonymity as the matter is not public. It
would be the first major property firm in the
United Arab Emirates to launch an initial public
offering (IPO) since the property market collapsed
in 2009, after similar plans by familyowned
Al Habtoor Group were shelved last year.
An IPO by a big Dubai name would also jolt
moribund equity markets in the region. The last
listing on the Dubai Financial Market index was
in March 2009, while the Abu Dhabi bourse has
seen only a couple of minor sales since 2008. The
IPO plan is at an initial stage and it was not clear
whether the listing was planned in Dubai or in
another international market. No details on the
DUBAI: A general view shows the opening session of the Arab Finance Ministers meeting in
Dubai yesterday. — AFP
potential valuation for the business was available.
DAMAC said a potential IPO is one of the
options considered for the company’s future
growth but gave no additional details. “As a
company of our size and scope, we are continually
looking at all growth possibilities and an IPO
is one of these routes,” said Niall McLoughlin,
senior vice president at DAMAC Properties.
Dubai’s property market has recovered gradually
in the last one year after a 60 percent
plunge in prices as investors fled the emirate following
the global financial crisis.
“The Dubai real estate sector is pretty hot
right now so they would want to capitalize on
that sentiment,” said one equity banker, declining
to be named as he was not allowed to speak
to the media. “They are one of the biggest
developers in Dubai - when you’re driving
around, you see their billboards everywhere -
and the obvious comparison, Emaar Properties,
has been doing pretty well recently.”
rials in paid-up capital and Al Izz having 100 million
rials. Oman’s first sovereign sukuk issue is
expected in about a year; the finance minister
said earlier yesterday that the issue would not
occur within 2013.
The rules also state that Islamic banks are
allowed to hold a maximum of 30 percent of
their net worth in sovereign sukuk, so pressure
will remain on the industry to develop other rialdenominated
Islamic products to manage liquidity.
Islamic banks in Oman have limited
investment options partly because the country’s
Islamic banking rules essentially ban the use of
commodity murabaha, a common tool used by
Islamic banks around the world to invest surplus
funds. — Reuters
Dubai developer Damac
plans share listing
BEIJING: Swedish furniture giant IKEA’s President and CEO Mikael Ohlsson delivers a speech to
university students in Shanghai yesterday on the development of IKEA’s global business. — AFP
Emaar Properties’ shares have risen 36 percent
year-to-date on the back of increased revenue
from hospitality and retail businesses. The
developer has approached banks, including
HSBC, Deutsche Bank, Morgan Stanley and
Goldman Sachs, the sources said. The company
is yet to pick an advisor for the proposed float,
the sources said.
Led by Hussain Sajwani, DAMAC symbolized
the flamboyance in Dubai’s property market during
the boom years, handing out sports cars and
luxury yachts to customers of penthouses and
duplex homes.
The developer slowed down during the
downturn but returned with new projects as
Dubai’s real estate market stages a gradual
recovery. DAMAC, formed in 2002, has completed
37 buildings and has another 66 buildings
under construction across the Middle East and
North Africa region. It recently announced a plan
to build a $1 billion development in partnership
with Viacom Inc’s Paramount Group. — Reuters
Egypt taxi drivers
storm finance
ministry gates
CAIRO: Egyptian taxi drivers stormed the gates of
the finance ministry in Cairo yesterday during a
protest against the terms of loan payments on
their cars, security officials said. Other taxi drivers
in the protest were upset that the government had
not yet replaced their old black and white taxis
with the more recent white cars that are equipped
with meters.
Ministry employees armed with clubs and
chairs prevented the drivers from entering the
building. Egypt had replaced most antiquated
black and white taxis in Cairo with more modern
white ones over the past four years, but some older
models were not eligible for the program.
The new taxis were bought through financing,
and many drivers now say they cannot afford to
keep up with payments amid increasing inflation.
Taxis, relatively cheap compared with Western
fares, are one of the main forms of transportation
in Cairo. — AFP