Debt-laden Zain Saudi Arabia, a telecommunications provider, has been given a reprieve after its parent, Kuwait's Zain Group, stepped in to save a $1.6 billion rights issue.
Parent sends strong signal to Zain Saudi
Debt-laden Zain Saudi Arabia, a telecommunications provider, has been given a reprieve after its parent, Kuwait's Zain Group, stepped in to save a US$1.6 billion rights issue that drew a tepid response from the market.
Shareholder Zain Group stepped in to cover the under-subscribed issue and has now raised its stake in the Saudi Arabian unit to 37 per cent, up from 25 per cent.
The fate of Zain Saudi Arabia had long been uncertain after its parent previously tried and failed to sell its stake in the company.
Ibrahim Masood, a senior investment officer for asset management at Mashreq, said the fact Zain Saudi Arabia had now boosted its stake in the subsidiary was a good sign.
"It's probably more positive than negative," he said.
"It's good news in the sense that the principle backers of Zain Saudi Arabia are still staying put."
However, Mr Masood said the move did not rule out a sale of Zain Group's stake in the Saudi Arabian unit in the future.
"I doubt if the earlier desire to sell it off has reversed course completely. I think they probably still want to do that," he said.
Zain Saudi Arabia has failed to make big inroads in the local mobile market where rivals Saudi Telecom and Mobily remain the dominant players.
Matthew Reed, a senior analyst at Informa Telecoms & Media in Dubai, said Zain Group's move to raise its stake in the Saudi Arabian unit was not necessarily "their ideal outcome".
However, it at least gives Zain Saudi Arabia a more solid footing in the market.
"You could describe this restructuring as a necessary but insufficient condition for Zain Saudi's success," said Mr Reed.
"It allows them to plan in a way that they weren't able to while this process was hanging over them."
Shares in Zain Saudi Arabia on the Saudi Tadawul All-Share Index traded slightly down a fraction at 12.05 Saudi riyals on Wednesday.
The market was closed yesterday.
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