Qatar Telecom may seek to buy Zain Saudi Arabia, a deal which would clear a regulatory hurdle for Emirates Telecommunications’ bid for parent company Zain, Bahrain based Sico bank said.
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.
Sico added: “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.”
It said: “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 the region.”
Sico also predicted 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. (Reuters)
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