Zain Saudi Arabia board proposes massive capital reduction

Zain Saudi Arabia has announced that its board has recommended the convening of an Extraordinary General Meeting (EGM) to seek the approval for a reduction in the company’s capital from SAR 10,801,000,000 (US$2.879 billion) to SAR 5,837,291,750, resulting in a reduction of 45.96 per cent. The total number of shares after the reduction is set to number 583,729,175 as compared to 1,080,100,000 shares currently. The capital reduction will involve cancelling one Zain Saudi Arabia share for every 2.18 shares prior to the reduction.

The principal reason for the proposed capital reduction is to write-off all of the company’s accumulated losses up to September 30, 2014.

The market value of Zain Saudi Arabia will not change as a result of the capital reduction, although the number of shares held by each shareholder will reduce. Therefore, the opening price of the shares on Tadawul (the Saudi Stock Market) will be calculated by multiplying the previous closing price by 1.85. This change will occur on the first trading day after the capital reduction is approved by shareholders at the EGM.

The proposed capital reduction is subject to obtaining all necessary regulatory and shareholder approvals. In the event that shareholders of the company approve the capital reduction at the EGM, the capital reduction will apply to all shareholders registered in the company register on Tadawul as at the close of trading on the day of the EGM.

Since its previous capital restructuring in 2012, Zain Saudi Arabia has experienced some unanticipated challenges to its operating environment. They have included aspects that are linked to the telecommunications sector in the kingdom, such as extremely competitive pricing on calls in the market and committing to new regulatory restrictions on prepaid lines. However the company successfully improved its financial indicators in the first nine months of 2014, reducing its net losses by 26 per cent compared to the same period in 2012 and by 19 per cent compared to the same period in 2013.