Qatar Telecom QSC offered $2.2 billion for the remainder of Kuwait’s National Mobile Telecommunications Co. as the company steps up acquisitions amid competition at home.
Qatar Telecom, majority owned by the gas-rich country’s government, will pay 2.6 dinars ($9.2) each for the 239.4 million shares it doesn’t own after approval from the Kuwait Capital Markets Authority, it said in a statement today. That’s an 18 percent premium to 2.2 dinars when the stock last traded on June 25. Shares of National Mobile, also known as Wataniya Telecom, have been suspended since the offer was announced.
“It’s reasonably priced,” said Umar Faruqui, a financial analyst at Kuwait-based Global Investment House KSCC. “Our fair value is 2.59 dinars. One of their strategies is to increase their stake in companies which are performing well, so Wataniya is one of them.”
Qatar Telecom, which owns stakes in phone companies from Tunisia to Indonesia, is expanding outside its home market where it faces competition from Vodafone Qatar, a unit of Vodafone Group Plc. The Doha-based company in June reached agreements to double its holding in Asiacell, a mobile operator in Iraq, for $1.47 billion. 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.
Qatar Telecom shares rose the most since May 10 to close 3.3 percent higher at 108.9 riyals in Doha today.
While Wataniya has suffered from currency losses in its Algerian and Tunisian operations, “the potential for growth is there, and Kuwait is a high-revenue market for Wataniya,” Faruqui said. Wataniya competes in Kuwait with Mobile Telecommunications Co., the market leader known as Zain, and with Kuwait Telecommunications Co., which operates under the Viva brand.
Qatar Telecom paid about $3.8 billion for 51 percent of Wataniya in March 2007 and its stake was most recently 52.5 percent, according to data compiled by Bloomberg. The Kuwait Investment Authority, the country’s sovereign wealth fund, is the second-biggest shareholder in the Kuwaiti phone company with 23.5 percent.
Today’s bid represents a multiple of 1.8 times revenue and 4.7 times earnings before interest, taxes, depreciation and amortization, according to data compiled by Bloomberg.
“This is very much in line with our strategy where, if we like an asset, we want more of it,” Qatar Telecom Chief Strategy Officer Jeremy Sell said today. The acquisition “is a good deal” for Qatar Telecom shareholders, giving them a more simplified structure, and gives Wataniya shareholders a chance to exit at “a reasonable premium,” Sell said in a Bloomberg television interview.
Qatar Telecom benefits from having Qatari government support and is “very interested in what’s happening in Europe,” Sell said. The company will discuss later this year whether to include Europe as part of its expansion area. “It’s currently off strategy for us but never say never,” he said. The Qatari company has focused on Southeast Asia, the Indian subcontinent and the Middle East and North Africa region, where it has the majority of its investments, he said.
Qatar uses wealth accumulated from the world’s third-largest gas reserves to acquire regional and European assets. Qatar Holding LLC in 2010 bought Harrods Ltd., while the country’s sovereign wealth fund has taken an 11.6 percent stake in Swiss miner Xstrata Plc. Mayhoola for Investments SPC, a company backed by unidentified Qatari investors, agreed to buy Italian luxury brand Valentino Fashion Group SpA last month.
Wataniya Telecom encompasses Qatar Telecom Group’s businesses in Kuwait, Tunisia, Algeria, Saudi Arabia, the Maldives and Palestine, according to Qatar Telecom’s first-quarter financial statement.