Sudatel faces ban for unpaid dividends

04/09/2010 00:00 AST

The UAE's markets regulator is threatening to suspend trading in shares of Sudan's state-owned telecommunications operator over the company's failure to pay dividends to investors on time.

The Emirates Securities and Commodities Authority (SCA) said it would halt trading in Sudatel Telecom if the company did not explain why it had not paid shareholders a dividend of 5 US cents (18 fils) per share as was promised in May.

Sudatel is listed on the Abu Dhabi Securities Exchange (ADX).

"We hereby notify you that the authority, according to its legal powers, will suspend the listing of your stock on the ADX as of Tuesday, the 7th of September 2010, unless the company commits to set a date for the distribution of dividends and notifies the authority and the market thereof prior to aforementioned suspension date," the SCA said in a letter to Sudatel posted yesterday on its website.

Investors say the dividend delay effectively gives Sudatel an interest-free loan. They say it also exemplifies a disturbingly relaxed attitude towards financial commitmentsin spite of relatively strong profitability.

The company made US$59.5 million (Dh218.5m) in the first half of this year, a 13.8 per cent rise from the same period last year. The 5 US cents per share dividend was for last year, when the company made $35.4m in profits.

"I'm not thinking of selling, but this would make shareholders put your picture on the wall, particularly this year when everybody's hard-up in terms of income," said Muneef Tarmoom, a shareholder and president of ISAT Consulting in Abu Dhabi.

Dividend payments from Sudatel have been delayed before, Mr Tarmoom said.

Representatives of Sudatel could not be reached for comment. Sudatel is listed in Khartoum, but most trading in its shares happens in Abu Dhabi because the market is deeper and better regulated.

Sudatel, which is more than 60 per cent owned by the Sudanese government, was founded in 1993.

In 2005 it sold its mobile phone network to Zain of Kuwait for $1.3 billion. It then started a rival network called Sudani that analysts say has been successful in the country's telecommunications market.

"Certainly the Sudani mobile arm has been doing pretty well, almost too well from the perspective of Zain, who are in Sudan as well," said Matthew Reed, a senior research analyst with Informa Telecoms and Media.

"They've had a huge cash cushion from the sale of Sudatel to Zain and are using that to move into other African markets."

Sudatel's international arm, Expresso Telecom Group, is based in the Dubai International Financial Centre.

The National