Al-Barrak, chief executive of Zain Saudi since stepping down from the same post with the larger Kuwaiti group a year ago, is talking to national and regional funds to gather financing that could eventually lead to an offer, two of the people said.

"The plan is to pursue the Zain stake rather than launch a public to private bid for the whole firm, which would not be acceptable to the Saudi authorities," one of these people said.

"He could launch a tender offer for shares if he wanted to increase the stake after that."

Zain has to sell its 25 percent stake in Zain Saudi for regulatory reasons so that it can sell 46 percent of its own stock for $12 billion to UAE telecom firm Etisalat.

The Etisalat deal is championed by Kuwaiti family conglomerate Kharafi group, a major Zain shareholder.

Al-Barrak, who left Kuwaiti Zain when a previous Kharafi attempt to sell 46 percent of the company to Asian investors collapsed, denied he was looking for investors to buy the stake, CNBC Arabiya reported.

He told CNBC Arabiya "the issue is related to shareholders and Zain Kuwait and he won't interfere in this matter in the short or long term," the station said on its website.

Earlier this year, Barrak was fined 50,000 riyals for disclosing at a press conference the possibility of a cap hike, according to Saudi Arabia's Capital Market Authority.

Bahrain Telecommunications or Batelco, and South African group MTN have already expressed interest in the Zain Saudi stake and UBS has been appointed to run the process, other people said previously.

The process has not progressed far beyond initial expressions of interest because of legal complications.

Al-Fawares Holding, which owns a 4.5 percent stake in Zain, has objected to the condition that the Saudi stake had to be sold.

A Kuwaiti court dismissed the lawsuit, but a lawyer for Al-Fawares said in December that it would appeal.

Several people said that they was skeptical about Al-Barrak's plan because Zain Saudi had a heavy debt load and because regulators would prefer the stake to be owned by a telecom company rather than private investors.

"It won't be doable because they'll face problems financing it. If a telecom operator does not buy the stake, I highly doubt the regulator would allow it to be owned by a bunch of individuals," another person said.

Zain Saudi, the Kingdom's newest mobile operator, has borrowed heavily to fend off cash-rich rivals, Saudi Telecom Co. and Mobily.

The company is in talks with lenders after missing some commitments last year on a two-year $2.5 billion Islamic loan.

Investor confidence in the Gulf Arab region has been hit over the past eight months by up to $22 billion of debt restructurings, and more recently by Dubai World's request for a standstill on $26 billion of debt.

Zain Saudi declined to comment.