Kuwaiti group Zain in March agreed to sell its 25-percent stake in Zain Saudi to Batelco and Kingdom Holding Co.
In July, Batelco estimated the deal would be completed within eight weeks.
“Due diligence is a work in progress,” Batelco chief executive Peter Kaliaropoulos said.
“It is fair to say the deal will be completed in the coming weeks. Whether it is two or three weeks or six or seven weeks, that is not the issue. The issue is to ensure any matters that arise are resolved in an amicable way.”
Kaliaropoulos will be replaced as CEO from Oct. 1, becoming CEO of strategic assignments.
The stake buyers, who will get management control, have yet to say how they will fund the deal.
Batelco’s cash balance is $231 million, according to its second-quarter statement.
“When we conclude the deal we will reveal how we will fund everything,” said Kaliaropoulos.
“Batelco has no debt on its balance sheet, so the ability to raise funding is not an issue.”
Zain Saudi’s debts top $5.5 billion. Of this, $2.6 billion is an Islamic facility repayable in 2012.
This is thought to be guaranteed by Zain and so likely needs refinancing for the stake sale to succeed, while Zain has also lent its affiliate about $651 million.
“Getting long-term financing would be a game changer for Zain Saudi and allow it to survive, otherwise I do not know how it will fund its cash flow,” said a regional telecoms analyst who asked not to be identified.
Kaliaropoulos would not be drawn on Zain Saudi’s debts.
“It is unfair now to speculate on what we are going to do when we have not concluded the deal,” he said.
Zain Saudi - a distant third to Saudi Telecom and Etihad Etisalat (Mobily) — paid $320 million in financial charges in 2010, nearly double that of 2009. The carrier pays about 8.5 percent interest on some debt, said the analyst, a big premium on Saudi’s key repo rate of 2 percent.
“Refinancing at nearer this (repo) rate will hugely help the company’s cash flow,” he said.
Zain Saudi makes an operating profit, but amortizing its $6.1 billion licence fee and other costs has left accumulated losses of about $2.3 billion. The firm plans to slash its share capital by more than half and then issue new shares to absorb most of these losses.
Zain Saudi is, however, seen as an attractive prospect.
Batelco’s home market, in contrast, has a population of about 1.2 million, revenues per user are down and customer costs are up, with profit falling for five straight quarters.
The former monopoly owns a 15 percent in Saudi fixed-line provider Atheeb Telecom and further synergies can come from Rotana media group, which has interests spanning television, film, radio and music.
A content partnership with Rotana could help Zain Saudi capture broadband market share, with Internet, not voice, the main growth engine for the kingdom’s telecoms operators.
