Etisalat bids $10.5bn for stake in Kuwait's Zain

Etisalat's offer would make it one of the largest telecommunications operators in the world.

Kuwait's Zain operates in eight countries and has about 32.7 million subscribers.

Stock rises on news Deal would make telecoms operator one of world's top 10 David George-Cosh Etisalat has made an offer of about US$10.5 billion (Dh38.56bn) to purchase a stake in Kuwait's Zain in a move that would make it one of the largest telecommunications operators in the world. The UAE's largest telecoms company submitted a "preliminary conditional offer" yesterday to buy an undisclosed stake in Zain, said Ahmed bin Ali, the group senior vice president of corporate communications.

Bloomberg reported Etisalat was seeking a 46 per cent stake worth $10.5bn, or 1.63 Kuwaiti dinars a share. Mr bin Ali's disclosure came as Zain stock soared 7.9 per cent in Kuwait after rumours reached the market. The deal would give Etisalat access to several new territories and boost its subscriber base from about 100 million customers to 133 million, making the company one of the world's top 10 mobile operators. Etisalat already operates in 18 countries across the Middle East and Africa. Closing the deal would depend on "the fulfilment of certain requirements and conditions", Mr bin Ali said.

About 10 per cent of Zain's shares are controlled by the Kuwaiti treasury. If shareholders approve the deal it would give Etisalat management control in the company. Zain operates in eight countries including Kuwait, Iraq, Lebanon and Saudi Arabia, and has about 32.7 million subscribers. Antoine Aboukhalil, a spokesman for Zain, said the company did not comment on shareholder issues. "Shares are publicly traded on the Kuwaiti stock exchange and people are free to trade whenever they want," Mr Aboukhalil said.

Etisalat has been rumoured to be interested in acquiring Zain since last year and recently downplayed reports in June that it presented an offer to acquire a stake. The deal would mark the winding down of one of the Middle East's largest telecoms operators. In February, Zain sold most of its African assets to Bharti Airtel for $10.7bn. "I think it might satisfy the company's appetite for a while but its mission is to keep expanding,"said Martin Mabbutt, a telecoms analyst with Nomura in London.

But Irfan Ellam, a telecoms analyst with Al Mal Capital, said Etisalat could be overpaying for Zain's assets. "[The offer] is a substantial premium to GCC markets," he said. "Zain is a mix of low growth and high growth. There's countries like Iraq with a lot of potential but you also have a mature market such as Kuwait." [e-mail] * with additional reporting by Brad Reagan