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Tue 26 Jan 2010 12:52 AM

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Zain to attempt to revive deal with Paltel

Deal for Zain to acquire 56% share of company through share swap collapsed last Nov.

Kuwaiti telecoms operator Zain said it hoped to revive and complete a deal to take majority control of Palestine Telecommunication Co (Paltel) by the end of the year.

Speaking to Reuters on Monday, Saad Al Barrak, chief executive, Zain, said: "We hope to complete the merger deal by the end of the year. We are now dealing as one company irrespective of ownership and as if we are two companies with one ownership until the merger is completed," after signing a deal to bring Paltel's 1.5 million subscribers into Zain's borderless mobile phone platform.

Last November, Paltel, the largest mobile operator in the West Bank and Gaza Strip, scrapped a deal to give Zain 56 percent of the company through a share swap.

Paltel said in a statement at the time that it considered the deal was no longer effective.

Industry executives said Paltel pulled out over management concerns even though the merger would have set up a new entity giving Paltel shareholders ownership of Zain's wholly owned Jordanian subsidiary, in return for Zain securing majority control in a combined entity.

Industry executives said they expected the revived merger talks would be based on the same terms of the suspended deal that entailed no cash transaction between Zain and Paltel.

Zain's wholly owned Jordanian subsidiary is the largest mobile operator in the kingdom with around 2.5 million subscribers.

But with almost 100 percent saturation of the Jordanian market, it wants to expand into the lucrative Palestinian market which only has a 35 percent penetration rate.

The merger of the Jordanian operations of Zain and Paltel was expected to generate over $1 billion in annual revenues and an estimated $300 million in net income, Zain executives said.

Industry executives said the revived talks were prompted by the entry of a second Palestinian mobile network, Wataniya, which had launched its mobile phone service in the West Bank last November.

Wataniya was moving aggressively to take market share from Paltel and had already hit a 120,000 subscriber base since the launch, executives say.

Industry executives said the fierce turf war in a saturated Jordanian market was now spilling over into the Palestinian market, with very similar demographic characteristics.

Wataniya is owned by Kuwait's Mobile Telecommunications Co, a unit of Qatar Telecommunications Co, and a holding company for Palestinian public assets.

Wataniya reached a deal last week with Zain's main competitor in Jordan, France Telecom's Jordanian unit Orange, to provide unified tariffs that could also pave the way for integration of networks, company executives say.

Zain, whose biggest shareholder is Kuwait's sovereign wealth fund, has spend billions in recent years to expand and operates in over 20 countries in the Middle East and Africa. (Reuters)

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