x Abu Dhabi, UAEWednesday 24 January 2018

Etisalat-Zain deal given 50% chance

Etisalat has a 50 per cent chance of closing a deal to acquire the Kuwaiti telecommunications operator Zain by the end of the month, an Etisalat executive said.

BARCELONA // Etisalat has a 50 per cent chance of closing a deal to acquire the Kuwaiti telecommunications operator Zain by the end of the month, an Etisalat executive said.

Jamal al Jarwan, the head of international investments for Etisalat, said the recent economic crisis has made it more difficult for telecoms operators to complete large-scale mergers.

Last year, Etisalat failed to complete any major acquisitions despite executives maintaining an aggressive foreign expansion policy. In September, the phone company offered to acquire a 46 per cent equity stake in Zain in a deal worth more than US$11 billion (Dh40.4bn). But the Zain deal has been mired in delays. Among the problems: the completion of Etisalat's due diligence process has been drawn out; and a Zain board member has filed two lawsuits in an attempt to halt the acquisition.

Etisalat said it has until the end of this month to complete its due diligence process for Zain.

"I think that Etisalat-Zain possibility [is] 50-50 so far, and [while] I don't want to give any impressions, I think the market cannot stand a lot of competition, especially in telecoms," Mr al Jarwan said during a panel session at the Mobile World Congress in Barcelona.

Mohammed Omran, the chairman of Etisalat, said he was still confident the deal could be completed in time.

"We are processing well with the due diligence, but we have not finished yet," said Mr Omran on the sidelines of the telecoms conference.

Mr Omran outlined three main conditions that would have to be finalised for the deal to close: the completion of Etisalat's due diligence process; the sale of Zain Saudi Arabia; and Etisalat acquiring 46 per cent of Zain's outstanding stock.

Etisalat already operates in Saudi Arabia under the Mobily brand and acquiring the Zain unit in the kingdom would not be allowed by the country's telecoms regulators. Kingdom Holding Company, Batelco and Riyadh Group have put in individual offers for Zain Saudi Arabia.

Mr Omran said it was "too early" to tell whether Etisalat had enough support among shareholders to reach its 46 per cent target.

If the Zain deal is successful, Etisalat would generate about half of its revenue from its international operations, Mr Omran said.

"Revenues from international [business] are always going up, much more than [in] the UAE," Mr Omran said.

"We have a five-year plan which is coupled with an acquisition strategy. If Zain deal goes ahead, that's something that impacts the revenue in a big way and raise it almost to 50-50. But if the Zain deal does not come, it would be a different."

Last week, Etisalat reported Dh31.9bn of revenue for last year, a 2 per cent rise from 2009.

Etisalat added 25 million subscribers from its international operations last year and now has 135 million customers across 18 countries. Etisalat's foreign subsidiaries now represent about 20 per cent of the company's total revenue, up from 14 per cent in 2009.

Sheikh Khalifa Ali Al Sabah, a member of Zain's board of directors, has disputed the deal and has filed lawsuits in Kuwait to block the sale of the operator to Etisalat.

Mr Omran said he respected Sheikh Khalifa and that he had a right to oppose the deal.

"Complex deals like this always will have resistance from certain people," Mr Omran said.