Batelco, Kingdom scrap $950m Zain KSA deal

Kingdom Holding and Bahrain’s biggest telco have withdrawn from a planned bid to buy a 25 percent stake in Saudi Arabia’s third mobile licence holder, saying terms for the deals could not be met. The decision “follows a period of due diligence and discussions with Zain Group and other shareholders,” Batelco said in an emailed statement Thursday. “The consortium concluded that the terms and conditions as set out in its non binding offer could not be met to its satisfaction." The two companies had previously indicated that they would complete due diligence on the $950m deal by the end of September. The Kuwait-based Zain Group agreed to sell its stake in indebted Zain KSA in March to Batelco and Kingdom. Zain Saudi's debts top $5.5bn, including $651m owed to Zain, according to first-quarter results, while it also must complete a capital restructuring to alleviate accumulated losses of $2.3bn. Saudi Arabia’s other two mobile licence holders, Saudi Telecommunications Company (STC) and Mobily, claim around 80 percent of the market share in the kingdom, with Zain KSA a distant third. Analysts said that it was unclear why the deal had fallen through at the last minute. “Conceivably, there might be a link to the court ruling in Kuwait last week that the most recent Zain AGM is void,” Matthew Reed, a senior analyst at Informa Telecoms & Media told Arabian Business. “This might have led Batelco/Kingdom to decide that it would face problems with the KSA deal. But this is only speculation – I can’t confirm that there is a link between the two events.” The breakdown of the deal follows reports earlier this month that Batelco is looking to sell up to 30 percent of S Tel - the Indian venture in which it holds a 42.7 percent stake – as competition heats up in its own markets. The company saw overall profits drop for the fifth straight quarter in the second quarter of this year, as gross revenues dipped by 4 percent. “The decision not to go ahead leaves Batelco with diminished strategic options,” Reed added. “Batelco had hoped that foreign investments would compensate for the lack of growth opportunities at home. But Batelco’s experiences with its Indian venture S Tel and now with the cancellation of the Zain KSA acquisition show that it is struggling to make a success of that plan.”