Mergers & acquisitions

Qtel Spends $3.7B for Wataniya Stake

Qatar Telecom QSC (Qtel) has agreed to acquire a controlling stake in Kuwait-based Wataniya Telecom -- which has operations in seven countries -- for $3.72 billion. (See Qtel Buys Wataniya.)

Under an agreement with Kuwait Projects Co. (KIPCO) announced Friday, Qtel will take a 51 percent stake in Wataniya in addition to 9 percent stakes in Wataniya's operations in Algeria and Iraq. The deal will be finalized this week as, according to local stock exchange regulations, such an acquisition has to be announced five days before it can be officially signed.

The deal marks the largest telecom acquisition in the Middle East to date, surpassing the $3.3 billion Kuwait's Mobile Telecommunications Co. (MTC) paid for pan-African mobile operator Celtel International B.V. in 2005. The UAE's Etisalat and Dubai's Oger Telecom had also expressed interest in acquiring Wataniya.

Qtel will pay 4.6 Kuwaiti dinars ($15.82) per share, a 48 percent premium on Wataniya's closing price of 3.1 dinars ($10.67) last week. Qtel's shares fell by 3 percent on the Doha Securities Market following the news, on concerns that it's overpaying for the operator.

Nasser Marafih, Qtel's CEO, told Reuters that Wataniya's operations in countries across the Middle East and North Africa make it worth the premium. "This acquisition is not being built from scratch. There will be good returns," he said.

Wataniya reported a 40 percent increase in revenues to $1.47 bllion in 2006. (See Wataniya Reports 2006.) It expects revenues of around $1.9 billion in 2007, which will more than double Qtel's revenues and increase net income by 70 percent.

Qtel, which is 55 percent owned by the Qatari government, has been on the hunt for acquisitions abroad in preparation for loss of domestic market share when the market is opened to a second operator later this year. The company raised a $2 billion credit facility last November that it said would finance its international expansion and in January formed a partnership with Singapore Technologies Telemedia Pte. Ltd. (ST Telemedia) in Singapore and Indonesia. (See Mideast Carriers Look to Asia for Growth and 2006 Top Ten: Emerging Trends.)

Outside Kuwait, Wataniya has joint ventures in Algeria, Iraq, the Maldives, Saudi Arabia, Tunisia, and Palestine (which is set to launch later in the year). It recently scored a $1 billion credit facility to finance expansion. (See Wataniya Gets $1B Credit.) Following the acquisition, Qtel will have interests in 11 countries; aside from its holdings in Qatar, Singapore, and Indonesia, it has a subsidiary in Oman.

— Nicole Willing, Reporter, Light Reading

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