x Abu Dhabi, UAEWednesday 24 January 2018

Etisalat moves in on Zain deal

Sale of subsidiary on the agenda as major shareholder of Kuwaiti telecoms operator agrees to call board meeting.

The Zain deal could be voted on by board members soon.
The Zain deal could be voted on by board members soon.

Etisalat's US$11 billion (Dh40.4bn) offer to buy a 51 per cent stake in rival operator Zain has inched closer to completion, with a leading shareholder of the Kuwaiti telecommunications operator agreeing to call a board meeting to discuss the sale of its Saudi Arabian subsidiary.

The Kharafi Group, a major Zain private shareholder with a 20 per cent stake, published an advertisement yesterday in local Kuwaiti newspapers calling for the meeting.

Etisalat already operates in the kingdom under the Mobily brand and acquiring the Zain unit would not be allowed by Saudi Arabia's telecoms regulators.

Batelco and South Africa's MTN Group have expressed their interest but have yet to make formal offers.

"We will call for a board meeting as soon as possible to vote on the sale of shares in Zain Saudi in the interests of shareholders in Zain," said Al Khair National for Stocks & Real Estate, a subsidiary of Kharafi. "The majority's decision by vote must be respected."

Antoine Aboukhalil, a Zain spokesman, declined to comment as the deal is being negotiated between the operator's shareholders, not its management.

Etisalat also declined to comment. The operator said last month it had begun the due diligence process and that its proposal would expire unless the companies both signed a "definitive transaction document" by January 15.

Irfan Ellam, a telecoms analyst at Al Mal Capital, said although Zain's board of directors could make a recommendation, its shareholders would decide the fate of the operator.

"Irrespective of what the board thinks, this should really be put to a shareholder vote," said Mr Ellam.

"The offer made by Etisalat has been very generous and it would be very beneficial for Zain to accept it. If the board's duty is to look after the interest of the shareholders, the board should recommend that shareholders accept the offer."

Meanwhile, another Zain investor attended a hearing in Kuwaiti commercial court yesterday to try to block the sale on the grounds that the operator opened its books to Etisalat for due diligence without its approval.

The Al Fawares Holding Company, which owns about 5 per cent of Zain, had its case deferred to next Wednesday. Officials from the company could not be reached.

However, a source at Zain who declined to be named said he expected the deal to win shareholder approval.

"This deal is too critical for Kuwait to not happen," said the source. "There is too much at stake here. There will be about $11.7bn that will be added to the Kuwaiti market, where liquidity is much needed. It will be much welcomed."