A deal to sell part of Zain has failed for a second time this year, as a consortium of companies abandoned plans to pay US$950 million (Dh3.48 billion) for the Saudi unit of the mobile phone company based in Kuwait.
The multimillion-dollar deal collapsed after Kingdom Holding Company, which is controlled by the Saudi billionaire Prince Al Waleed bin Talal, and Bahrain Telecommunications Company (Batelco) pulled out of buying a 25 per cent stake in Zain KSA.
"The terms and conditions as set out in [the consortium's] non-binding offer could not be met to its satisfaction," Kingdom Holding said.
The collapse marks Zain's second failed attempt at securing a major deal this year.
In March, the UAE telecoms operator Etisalat abandoned plans to pay $12bn for a majority stake in Zain.
Those talks fell apart after a shareholder dispute at Zain, regional unrest and an extended due diligence process.
Etisalat also said the deal broke down due to a Kuwaiti law that would have nearly doubled the cost of its $12bn transaction.
Just before Etisalat ended its talks, Batelco and Kingdom Holding initiated their own deal and had recently been completing a due diligence process.
One telecoms expert who was part of the team that tried to help salvage the deal late on Monday would not say precisely why the talks ended but noted there were a number of reasons.
"There are market reasons, legal reasons," he said. "You look at all of them together."
Some observers also say a recent court decision may have played a role. On Sunday, a lower court in Kuwait declared Zain's annual shareholders meeting, which was held in April, was invalid and that its board was illegitimate. The ruling upheld a case brought by a former board member who had opposed the process to elect the board.
While Batelco's chief executive told Reuters the ruling would not derail the $950m deal, some analysts said the timing was uncanny.
"The due diligence was going through," said Matthew Reed, an analyst based in Dubai for Informa Telecoms & Media's Middle East and Africa regions. "It's possible there was a link."
Zain acknowledged the deal had been called off, noting it was "acting in the best interest of its shareholders [and] looks forward to assisting Zain KSA in the development of [its] mobile telecommunications business in the kingdom in the future".
News of the failed deal sent shares of Zain tumbling more than 4 per cent at one point during trading yesterday on the Kuwaiti bourse. This year, the company's stock has plunged 38 per cent, compared with 16 per cent for Kuwait's benchmark index.
Zain faces a number of challenges with its unit in Saudi Arabia, said Mr Reed. "Zain in Saudi Arabia has a very high level of debt.
"Also, it is quite a distant third place behind STC [Saudi Telecom Company] and Mobily. Zain … seems to rely to quite an extent on promotions and offers to get new customers and subscribers. That strategy often leads to a high turnover of customers."
* with Bloomberg News