Syed Mokhtar in RM48b Kuwait telco deal

Written by The Edge Financial Daily
Thursday, 10 September 2009 00:34

KUWAIT: Low-profile bumiputera tycoon Tan Sri Syed Mokhtar Albukhary, who has his fingers in businesses ranging from ports to oil and gas, has now ventured into telecommunications.

He is part of a consortium acquiring a 46% stake in Kuwaiti telecom company Zain for some US$13.7 billion (RM47.95 billion), according to a report from Reuters.

Apart from Syed Mokhtar, other members of the consortium are India’s Vavasi Group, regional telecom companies Bharat Sanchar Nigam (BSNL) and Mahanagar Telephone Nigam Ltd (MTNL). Both BSNL and MTNL have the Indian government as a major shareholder while Vavasi is a diversified group with an array of businesses ranging from real estate to broadband.

According to a report from India, the government has stated that they are not involved in talks in relation to the Zain deal at the moment.

Reuters quoted an official from Kharafi Group, who is a major shareholder in Zain, stating that the consortium would pay two dinars (RM24) a share in a deal that values the stake in the Arab world’s third-largest telecommunications company at about US$13.7 billion, making it one of the biggest overseas acquisitions in the Gulf region.

Kharafi vice-president Bard al-Kharafi told a news conference that the deal would take four months to complete.
“It’s considered a good opportunity to exit the investment,” he said when asked why the company was selling its stake. “This deal is considered a profit for both parties.”

Listed on the Kuwait Stock Exchange, Zain’s largest shareholder is the Kuwait Investment Authority, with 24.6%. According to its website, Zain has commercial footprint in 24 Middle Eastern and African countries with over 69.5 million active individual and business customers as at June 30, 2009.

al-Kharafi confirmed this week that it was in talks to sell its position in Zain, estimated at about 20%, along with other shareholders. Combined, the group holds a 46% stake.

National Investments Co, owned by the Kharafi Group, said on Sept 7 that one of its portfolio clients Al Khair National had informed it that it was reviewing a sale of the Zain stake.

“The involvement of small investors in this deal is according to the agreement (between the small investors) and Al Khair, with the same price,” al-Kharafi said on Sept 8, adding that the majority of other Zain shareholders involved in the deal were small, permanent stakeholders.

“Al Khair group signed to provide 46% and God willing we are able to get this percentage.”

No decision has been reached on how the stake would be divided among the consortium, Vavasi said, adding that the group had been in discussions for seven months on a potential deal.

Zain, which operates in 24 countries including Saudi Arabia and Nigeria, has been in the midst of a strategic review and repeatedly denied rumours that a stake sale was imminent.

The Kuwait firm, renowned for its aggressive acquisition policy, has retained UBS as an adviser and is shopping its African assets, marking an abrupt turnaround from its stated goal of becoming a top ten global telecom player.

Market speculation of a sale has propelled its stock up 53% since July 9, to an 11-month closing high on Sept 6, a day after its chief executive told Reuters it was in early talks to sell a stake in its African operations, minus its Moroccan and Sudanese businesses.

Talk of a stake sale in Zain itself was also rife, with management saying it was unaware of any such plans. Last month, shareholders voted to scrap individual ownership limits.

Vavasi Telegence’s managing director said on Sept 8 that the new shareholders now had no plans to offload the African operations.

“Our plan is to consolidate networks further and roll out larger networks and cover greater markets. It’s not to sell for sure,” Farid Arifuddin said at a news conference.

Arifuddin said there was a good fit between Zain and the Indian companies in the consortium.

“We see a lot of synergy between India and other countries where Zain group is in operation in Africa,” he said.

“What we bring to the transaction is our experience especially our prospective partners from India. They have the experience of operating in low-cost countries.”

Zain stock has dropped 11.5% since Sunday’s close.