Etisalat looks to swallow Zain

The UAE’s Etisalat has confirmed it has submitted a bid to acquire a 46 per cent stake in the recently downsized Arab mobile operator Zain Group. Should the deal go through, as analysts and market commentators expect it shall, the acquisition will represent the final stage of the decline of Zain from leading pan-Arab/African operator in early 2009, to investment opportunity with little future as a standalone operation.

Etisalat said it had made a bid amounting to KWD 1.7 (US$5.96) a share for a 46 per cent stake in Zain, valuing the offer at US$11.8 billion.

Kharafi Group, which is believed to control around 20 per cent of Zain Group stock, said it would accept Etisalat’s offer for its stake. Nasser al-Kharafi, the head of Kharafi Group is reported to have told media in Kuwait that the offer was “suitable and good for both parties”.

It was the Kharafi Group’s need for cash which is believed to have prompted the US$10.7 billion sale of Zain’s mobile assets in Africa to India’s Bharti Airtel earlier this year. It is the continued cash crunch that is understood to be driving the further sale of Zain assets.

Etisalat said its bid is conditional, and is dependent on the fulfilment of specific requirements and conditions. A Zain insider told Comm. he believed these to be related to outstanding Zain loans as well as the overlap of operations in Saudi Arabia, where both Etisalat and Zain Group have operations.