Qtel Says Stake Increase in Wataniya Telecom Positive for Rating

Qatar Telecom QSC, the Middle East’s second-biggest telecommunications company by revenue, said boosting its stake in National Mobile Telecommunications Co. will be “slightly positive” for its credit rating, even after Moody’s Investors Service signaled the move could lead to a downgrade.

The company, known as Qtel, will get a significantly bigger “net profit consolidation from both,” Chief Strategy Officer Jeremy Sell said in a telephone interview today. “I think it will be regarded positively by the rating agencies.”

Qtel, bought 199.65 million shares of the Kuwaiti company for 519.1 million dinars ($1.8 billion) at 2.6 dinars a share raising its stake to 92.1 percent from 53 percent, according to an e-mailed statement by the Qatari company today.

Moody’s Investors Services said in June that Qtel’s offer to raise its stake in the company known as Wataniya is “credit negative” and it “will reduce Qtel’s liquidity headroom.” The deal came after Qtel agreed to double its holding in Asiacell, a mobile operator in Iraq, earlier this year for $1.47 billion. Moody’s ranks Qtel’s credit A2 and “stable,” according to data compiled by Bloomberg.

Wataniya encompasses Qatar Telecom Group’s businesses in Kuwait, Tunisia, Algeria, Saudi Arabia, the Maldives and Palestinian territories, according to Qatar Telecom’s first-quarter financial statement.

The Sum of Parts

The increased stake in Wataniya may have “removed a lot of discount people put on our stock,” Sell said.

“We’ve always felt there was a little discount in the Wataniya stock price because it was illiquid,” he said. “Hopefully, now when people look at Qtel they will value it at the sum of the parts.”

Qtel, which owns stakes in phone companies from Tunisia to Indonesia, plans “to continue to invest,” Sell said. The company is keeping track of 15 to 20 companies that may be of interest, he said.

Qtel is expanding outside its home market where it faces competition from Vodafone Qatar, a unit of Vodafone Group Plc. (VOD) It teamed up with Princesse Holding of Tunisia in 2010 to buy Orascom Telecom Holding SAE’s 50 percent stake in Telecom Tunisie for $1.2 billion.

Morocco is one country that Qtel follows “very closely” and Maroc Telecom, the African wireless unit of France’s Vivendi SA (VIV), is the only operator “that might be in play,” Sell said.

Qtel’s share price rose 0.1 percent today to 104 riyals on the Qatar Exchange. The stock has gained 10.3 percent this year compared with a 3.15 percent decline for the QE Index of Qatari companies.

To contact the reporter on this story: Robert Tuttle in Doha at rtuttle@bloomberg.net

To contact the editor responsible for this story: Shaji Mathew at shajimathew@bloomberg.net

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