Zain opts for paper swap to take control of Paltel

In an official signing ceremony held in Amman, Jordan today, Zain and Palestinian Telecommunications Company (Paltel) have entered into an agreement for a share-for-share exchange, which will see Zain take a majority interest in Paltel with an equity shareholding of 56.53 per cent in exchange for Paltel owning 100 per cent of Zain Jordan. Paltel is a publicly-listed entity on the Palestinian Stock Exchange and Abu Dhabi Securities Exchange. The merger will set the current Paltel shareholders equity position in both Paltel and its newly acquired subsidiary, Zain Jordan at 41.43 per cent.

Left, Saad Al Barrak, CEO of Zain Group; right, Sabih Al-Masri, chairman of Paltel at the signing ceremony

The share-swap transaction involves an exchange of a total of 58.57 per cent of Paltel’s shares for 100 per cent of the shares of Pella Investment Company (Pella), the holding company of Jordan Mobile Telephone Services Company (Zain Jordan). Zain’s equity in Pella, at 96.516 per cent, will be exchanged for 56.53 per cent of Paltel’s equity whilst the balance of equity held by the other shareholder in Pella, 3.484 per cent, will be exchanged for 2.04 per cent of Paltel. Paltel will own 100 per cent of the shares of Pella, and its underlying subsidiary, Zain Jordan.

Through this transaction, Palestine will become the 24^th territory in which Zain will have a commercial footprint. The mobile operation in Palestine currently known as ‘Jawwal’ will be rebranded to Zain by the end of this year. This mobile operation will also join Zain’s ‘One Network’ platform, bringing to 19 the number of countries that benefit from the roaming offering.

The combination of both Zain Jordan and Paltel will produce a business group that will generate over US$1 billion in revenues, US$450 million in EBITDA and US$300 million in net income in 2009.

“A merger of this nature, with immediate opportunities for synergies between the two leading operators in Jordan and Palestine, will create substantial value for shareholders and enable us to create a strong operating platform for our businesses in the Levant and beyond,” said Saad Al-Barrak, CEO of Zain Group.

Paltel has a base of 1.5 million active mobile customers and over 363,000 fixed line customers, as well as approx 78,000 ADSL customers as of March 31, 2009. Zain Jordan counts over 2.35 million active mobile customers.