Emirates Telecom, known as Etisalat, confirmed on Thursday
it bid 1.7 dinars a share for a 46 percent stake in Kuwait-based Zain, the Gulf
Arab region’s third-largest telecoms firm, valuing the stake at just under $12
billion.
Investors in Zain’s Saudi affiliate reacted well to the
announcement of Etisalat’s bid for Zain. On their first trading day after the
announcement, shares in Zain Saudi Arabia rose intraday by up to 5.7 percent on
Saturday.
Because the Saudi mobile phone market is a competing ground
for state-controlled Saudi Telecom, Etisalat — through affiliate Mobily — and
Zain, the announcement of the bid has raised questions about the future of
Zain’s 25 percent stake in Zain Saudi Arabia.
A merger of Mobily and Zain “seems unlikely” since it would
violate merger guidelines in Saudi Arabia’s Telecom act, Sico said in a
note.
“A merger (of Saudi mobile phone operators) should not
prevent or lessen competition substantially. The merged (Mobily-Zain Saudi)
entity will have close to 55 percent mobile market share in this case and will
definitely lessen competition in the kingdom,” Sico added.
“In this context, Qatar Telecom could be a possible
contender for taking over Zain’s Saudi operation considering its strategic
ambitions to expand its operations in its strategic ambitions to expand its
operations in the region,” it said, predicting that Zain’s Saudi stake would be
worth $925 million assuming a 25 percent premium for a controlling stake.
Zain Saudi Arabia has paid $6 billion for a licence to
operate in the biggest Arab economy and has come under intense pressure from
its two rivals. Officials at
Qatar Telecom could not be reached for a comment.
Zain Saudi Arabia plans to restructure its capital, cutting
it by almost half to cover accumulated losses, and later launching a rights
issue to raise it by nearly 60 percent.
