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Saudi Telecom Buys $2.6B Oger Stake

Saudi Telecom Co. (STC) is continuing its push into international markets with the acquisition of a 35 percent stake in Oger Telecom , a holding company with interests in Turkey and South Africa, for $2.56 billion. (See STC Buys Oger Stake.)

Oger Telecom, a subsidiary of Middle Eastern construction company Saudi Oger, holds stakes in Turkish fixed-line operator Türk Telekomunikasyon A.S. and its mobile unit Avea, South African mobile operator Cell C , and Cyberia, an ISP with operations in Saudi Arabia, Lebanon, and Jordan.

Saudi Oger has been trying to sell a stake in Oger Telecom for more than a year -- it abandoned a $1.25 billion IPO in Dubai and London in late 2006 in the face of volatile markets across the Middle East, and broke off talks with Vivendi over a 33 percent stake last year. (See Vivendi Ends Oger Talks.) Telecom Italia (TIM) sold its 10 percent stake in the company to Saudi Oger back in June. (See Telecom Italia Sells Oger Stake.)

The deal values Oger Telecom at $8.14 billion, about a third more than the planned $5.7 billion IPO.

Saudi Telecom, the largest carrier in the Middle East by revenues and one of the ten largest emerging markets carriers, was the last of the major players in the region to begin making acquisitions abroad. (See Top Ten: Emerging Markets Carriers.)

STC made its first international foray last June with a $3.05 billion investment in Binariang, owner of Malaysian fixed and mobile operator Maxis Communications Bhd. -- which also has operations in Indonesia and India. (See Saudi Telecom Invests $3B in Maxis.) It followed that up with the $900 million purchase of Kuwait's third mobile license in November.

The state-run carrier has seen profits fall in the face of increasing competition from Etihad Etisalat Co. (Mobily) , the country’s second mobile operator, which had captured a 40 percent market share by the end of 2007 and reported a 55.8 percent increase in quarterly profit Sunday.

That pressure will only increase as Kuwait's Zain Group launches a third operator this year, having won the license in March, and groups led by Verizon Communications Inc. (NYSE: VZ), Bahrain Telecommunications Co. (Batelco) , and PCCW Ltd. (NYSE: PCW; Hong Kong: 0008) launch rival fixed-line operations. (See Who Does What: Middle East Carriers.)

STC reported fourth quarter results Monday, with the news that net income grew for the first time in six quarters -- up 9.6 percent from 2.79 billion Saudi riyals (US$741.83 million) to SAR3.05 billion ($810.97 million). Reuters estimates had ranged from SAR3.22 billion ($856.17 million) to SAR4 billion ($1.06 billion). Full-year profit dropped by 6 percent to SAR12.02 billion ($3.2 billion) from SAR12.8 billion ($3.21 billion) the previous year.

The carrier said subscriber numbers grew 22 percent during the quarter, but didn't say what those numbers were.

— Nicole Willing, Reporter, Light Reading

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