Dubai Holding's main unit, which said on Thursday it repaid a 250 million Swiss franc ($304.9 million) bond, may sell its entire telecom portfolio over the next three years primarily to repay contractor liabilities, JP Morgan said in a note.

Dubai Holding Commercial Operations Group  (DHCOG) is part of the conglomerate owned by the emirate's ruler  which is in talks with lenders to restructure $10 billion of debt.

The unit's telecoms portfolio includes stakes in Tunisie Telecom and UAE operator du and is worth an estimated $2 billion, J P Morgan analyst Zafar Nazim wrote in a note on Thursday.

"Based on a number of mangement comments, we expect the company to sell all these assets over time," Nazim said in the note. "We expect the company to refinance future debt maturities and shift its focus to paying contractors."     

The analyst said sales would go toward repaying nearly $2.3 billion of DHCOG's estimated $3 billion in contractor liabilities. The company, which reported a return to profit in 2010 after a massive loss the previous year, has a 35 percent stake in Tunisie Telecom and a 19.5 percent stake in du.

A DHCOG spokeswoman was not immediately available for comment. DHCOG and parent Dubai Holding are part of a matrix of firms known informally as Dubai Inc. that includes indebted conglomerate Dubai World. Dubai Inc firms were badly battered by the financial crisis and a subsequent property collapse that plunged Dubai into a debt crisis in 2009.

Earlier on Thursday, DHCOG said it had repaid the Swiss franc bond which matured on July 14 and was "committed to meeting its financial obligations as they fall due."     

With the repayment of its bond, DHCOG total debt has declined to about $3.6 billion from its peak of $4.45 billion in 2008, J P Morgan said.         

DHCOG made payments of 2 billion dirhams to contractors in 2010, the company told J P Morgan.     

Management also said it would not enact a global settlement with contractors or issue bonds, as in the case of Dubai developer Nakheel , the research note said.

"(DHCOG)... instead will continue to negotiate with contractors on a one-on-one basis," said the note.

Nakheel, the property arm of Dubai World, offered trade creditors 60 percent repayment through an Islamic bond as part of a separate $10.9 billion restructuring plan.

Measures such as timely repayment of debt maturities as they fall due are likely to further improve sentiment towards Dubai but worries remain about the ongoing restructuring of another Dubai Holding unit, Dubai Group.      

DHCOG assets include the Jumeirah hotel group and business parks and hospitality units. J P Morgan said the company's rental portfolio, which includes several offices in a Dubai mixed-use business park, is expected to be its cash cow.  - Reuters