Competition Drives Mideast M&A

Market liberalization is a key theme driving telecom activity in the Middle East right now. Here are a few of the latest examples:

  • The government of Oman is inviting bidders for a 25 percent stake in incumbent fixed and mobile operator Oman Telecommunications Co. (Omantel) , reducing its 70 percent holding to 45 percent. The government sold the other 30 percent in Omantel’s 2005 IPO on the Muscat Securities Market.

    In a statement to the stock exchange, the government said it’s “seeking a strategic partner to further strengthen Omantel’s market position and establish Omantel as a world-class provider of telecommunications services both in the Sultanate and internationally,” indicating there may be more foreign expansion in the carrier’s future.

    To sweeten the deal, the government says it’ll consider giving the new investor voting rights on Omantel’s board.

    Saudi Telecom Co. (STC) , Kuwait-based Zain Group , and Qatar Telecom QSC (Qtel) have all expressed interest in the sale. The deadline for bids is July 18, and the government expects to complete the sale by the end of the year.

    Omantel, whose Oman Mobile Telecommunications Co. LLC unit competes with Qtel subsidiary Nawras , had 1.48 million mobile subscribers, 268,000 fixed lines in service, and 69,000 Internet customers at the end of 2007.

    Omantel made its first foray abroad last November, acquiring a 65 percent stake in WorldCall Communications Pakistan for $185.6 million. (See Who Does What: Middle East Carriers.)

  • Etihad Etisalat Co. (Mobily) , Saudi Arabia’s second mobile operator, has received approval to acquire a 96 percent stake in ISP Zajil International Telecommunications Co. for SAR80 million ($21.3 million) to expand its corporate business.

    The carrier, which expects to invest more than $1 billion in broadband and wireless networks over the next few years, is going the acquisition route after it failed to score a fixed-line license last year. It bought data provider Bayanat Al Oula, one of two WiMax license holders, for $400 million in September 2007.

    Mobily and Saudi Telecom are gearing up for the entry of the country’s third mobile operator, Zain, later this year, followed by three new fixed-line operators owned by Bahrain Telecommunications Co. (Batelco) , Hong Kong's PCCW Ltd. (NYSE: PCW; Hong Kong: 0008), and Verizon Communications Inc. (NYSE: VZ). (See MTC Bids $6.1B for Saudi Mobile License and VZB Wins Saudi License.)

  • Egypt’s National Telecommunication Regulatory Authority has pushed back the deadline for bids for the country’s second fixed-line license, which will create a competitor to Telecom Egypt . The regulator says in a statement that it’s extending the process, which had already been delayed from mid-June to July 29, until Sept. 18.

    That will give it more time “to set the bases for the interconnection agreement between the second fixed provider and the mobile network operators in the light of the latest discounts of the fixed tariffs.” The regulator introduced new tariffs effective July 1 in a bid to make fixed-line services more affordable for consumers.

    The regulator is also holding off in the hopes that market conditions will improve so that the license will attract a higher valuation: “The fluctuation witnessed in the foreign exchange markets is another factor that urged the postponement decision.”

    Twelve companies have requested information on the license specifications and conditions, including Orascom Telecom , Etisalat , and Orange (NYSE: FTE).

    — Nicole Willing, Reporter, Light Reading

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