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Wed 16 Mar 2016 04:08 PM

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Tower firms eye Zain's assets in Kuwait, Saudi Arabia

Sources say Kuwaiti telco is narrowing field of potential bidders for mobile transmitter towers

Tower firms eye Zain's assets in Kuwait, Saudi Arabia
GCC telecoms

Kuwaiti telecoms group Zain is narrowing the field of potential bidders for its mobile transmitter towers in Kuwait and Saudi Arabia, sources familiar with the matter told Reuters.

Should a deal be concluded for the 7,000 towers owned by Zain Saudi, the proceeds will be used to pay off some debt, the sources said, speaking on condition of anonymity.

"Several tower companies have expressed an interest. Zain Group is assessing these to create a shortlist of serious potential buyers," said one of the sources. "Whether a deal will happen or not, it's too early to say."

Another source said about half a dozen potential buyers had been identified for Zain Saudi's towers, including companies from the United States, Europe, Africa and the Middle East.

Citigroup is advising Zain Group, which is also in the process of selling its 1,900 towers in Kuwait, he added.

No tower deals have been completed in the Middle East, but operators are increasingly keen to dispose of assets that now provide little competitive advantage due to broadly similar network quality and coverage.

Saudi's Mobily is also trying to offload its towers and there could be first mover advantage for buyers and sellers in the kingdom.

"If Mobily and Zain both sell towers, there is a strong likelihood of there being duplicate locations within their tower portfolios, which would then reduce the value of those locations," said Amy Cameron, Head of ICT Research at BMI Research.

Zain Saudi, the kingdom's No.3 mobile operator by revenue and 37 percent owned by Zain, had long-term debts of 11.07 billion riyals ($2.95 billion) at the end of 2015, mostly associated with buying its $6.1 billion licence.

"A sale would help improve the company's balance sheet," said the first source.

Four tower deals agreed in more populous India in 2009-12 valued towers at $60,000-103,000 each, a report by consultants AT Kearney shows.

Taking the lower end of this range, Zain Saudi could expect to raise around $500 million from selling its towers - little new tower infrastructure is required in Saudi where mobile penetration is 180 percent and 4G is readily available, so there is less growth potential for tower companies.

The first source said a deal, if agreed, could be signed this year, though such transactions are complicated with thousands of assets to be valued and transferred and telecom regulator approval is required.

American Tower Corp is among the world's largest specialised tower companies, while in Africa, the industry is led by Nigera's IHS.

Tower companies can benefit from economies and scale and reliable revenues from telecoms operators.

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