By David Ingham
The Kuwaiti mobile telecomms company says its US $423.9 million acquisition of 91.6% of Jordan’s Fastlink is just the beginning of a major expansion drive.
MTC’s US $423.9 million acquisition of 91.6% of Jordan’s Fastlink could be just the start of a major shopping spree for the Kuwaiti mobile telecomms company.MTC’s director general, Dr Saad Al Barrak, told Arabian Business this week that the company intends to spend $1.2 billion on further acquisitions and to have five million subscribers by the end of 2005.The Kuwaiti company also intends to bid for a GSM license in newly deregulated Bahrain and may look to move into Saudi Arabia when the GSM market opens there in 2004. “For us, as a mobile telecommunications company, Kuwait is a small market nearing saturation. We and our competitor, combined, today have 1.2 million subscribers in a country of 2.2 million people,” says Dr Al Barrak.“There is not much growth opportunity, so we have no option but to be a regional player in line with everybody else’s rush to be a regional player.”The all cash acquisition of Fastlink will be funded 75% through debt, mostly borrowed from National Bank of Kuwait, MTC’s advisor. Out of a cash reserve of $500 million prior to the deal, MTC will now have around $400 million in hard cash left.To fill the rest of its intended $1.2 billion war chest, MTC will take on further debt and create investment funds that will be managed in co-operation with National Bank of Kuwait. The company is currently unable, for regulatory reasons, to use its own equity in acquisitions.Dr Al Barrak disagrees with suggestions that the company’s expansion plans are aggressive and that it could get itself into the same debt problems as other telecomms companies.“We have zero debt [prior to the MTC takeover] and our debt after three years will be less than $1 billion,” he says. “Our equity by that time will be $2 billion. It will be 2 to 1 equity to debt, which is not a big issue. The difference is in the financial structure and robustness of MTC and our extremely conservative, stringent financial policy. We will not over extend ourselves; we will only grow our body as much as our muscles allow us.”Dr Al Barrak is also confident that the mobile telecomms market, saturated elsewhere in the world, still has plenty of room for growth in the region.“Our target market is the area extending from Pakistan to Morocco, and from Turkey down to mid-Africa. This market is populated by 450-500 million people and the penetration rate is less than 5%. So you can see we have huge potential. The market might be saturated in Europe, but it is not here,” he says. “Because we are situated in this area with intimate knowledge of this market, its culture, its politics and with our experience, track record and deep pockets we are better positioned than others to leverage the opportunities in this market.”